In an analysis of the causes of the financial crisis of 2008, the European Central Bank (ECB) and many other regulatory authorities discovered, inter alia, major deficiencies in institutional IT and data architecture. As a result of these deficiencies, risk assessments could not be performed sufficiently quickly and accurately, and not completely either. In short: Risks could neither be reported nor controlled to an appropriate extent. In the wake of this lesson, the Basel Committee on Banking Supervision (BCBS) published standard 239, widely known through press releases and also referred to as the "principles for effective risk data aggregation and risk reporting" and AT 4.3.4 of MaRisk.
These institutions are impacted by standard BCBS 239
BCBS239 is a regulatory requirement for financial institutions. Its implementation is graded according to the systemic relevance of the institutions. Three different general gradations are provided here:
- Global systemically important banks (= G-SIBs)
- Domestic systemically important banks (= D-SIBs, or national SIFIs)
- Other, e.g. regional systemically important banks (= R-SIBs)
Implementation of BCBS239 for the G-SIBs and D-SIBs was to be completed no later than April 2018, as indicated by the timeline below. Implementation for all other institutions is not mandatory, but viewed by regulatory authorities as important and highly urgent.
However, the ECB's status report on implementation of BCBS239 dated May 2018 clearly shows that implementation at most institutions has either not been performed at all, or is incomplete. There is therefore still much to be done!
Even if BCBS 239 is a mandatory requirement only for financial institutions, the added value through transparency, assured quality of data and their availability, as well as the infrastructure and organization necessary for this is also a clear added value for institutions across all sectors at the present time, when "data is the gold of the future". It is therefore advisable to take into account the basic values of BCBS 239 at least partly in the BI strategies of other companies.
The four pillars of BCBS 239
BCBS239 describes the steps necessary for change in the handling of data in the banking sector. The following four fundamental and closely inter-related groups of topics have been recognized here:
Establishment of data governance organization and IT architecture compliant with BCBS239, and resultant development of a general definition across corporations and businesses in terms of collecting and processing of risk-related data, is an important building block on the way to enterprise conformance with BCBS239. Furthermore, there is a need for action in the areas of risk-data aggregation and risk reporting, because of high demands on the quality and consistency of risk data and reports.
Especially in relation to internationally active institutions, it is important to not view all described action groups in isolation separately for each country. Rather, regulatory authorities are to examine local implementations as well as interactions between countries and the headquarters. It is essential to avoid inconsistencies due to isolated approaches!
Provided below (simply expand the heading) is a full list and overview of all fields of action to be taken into account during transformation into an institution compliant with BCBS239, accompanied by specific descriptions of recommendations.
The group of topics titled "Regulation" refers to recommendations and guidelines for regulatory authorities and is therefore not considered further here.
Overview of fields of action
Governance & processes
|Data governance|| |
|Data quality|| |
|Metadata management|| |
IT infrastructure & organization
Accuracy & integrity
Take these steps to successfully achieve organization compliant with BCBS 239
BCBS239 is not a one-time effort which, once implemented, is finished and completed. Rather, it is a cycle which begins with initial implementation, and needs to be regularly checked and adapted in a constantly changing world.
b.telligent's many years of project experience have led to development of an efficient approach comprising structured and organized planning of measures in the following groups of topics:
- Data strategy
- Data governance
- Data architecture / data integration
Specialists from all four areas should always check compliance according to the principles of BCBS239, in order to derive a sophisticated action strategy as well as concrete measures in terms of the processes to be implemented, as well as technical realization.
1. Data strategy
Every BCBS239 project should ideally start with quick checks in the areas of governance & infrastructure, risk-data aggregation and risk reporting (see above). These cover professional as well as the technical aspects, and should be repeated in further cycles within the framework of continuous control.
2. Data governance
Data governance encompasses definitions of sovereignty/responsibility over systems, data, key figures and business processes. Documentation and adherence to such roles/duties are the theoretical and professional foundations for regulatory requirements. Necessary fields of action in this area are determined from analyses of data strategy.
3. Data integration and architecture
From a technical standpoint, support in DWH and reporting is required in relation to the following BCBS239 topics:
- Governance & infrastructure
- Risk-data aggregation
- Risk reporting
Most of the tasks for this point emerge from analyses of data strategy, definitions of data governance and the technical fields of action identified from executed processes.
For the areas of data integration, databases and reporting, the tool expertise of b.telligent's partners is accessible. As a vendor-independent consultant, b.telligent gladly provides support in tool evaluations. A use of tools commonly available on the market is recommended with regard to the topic of data governance and data-quality measurement.
At the end of each development cycle, an examination should be performed by a neutral body, for example, by the internal audit department. The result of such an examination can serve as input for the next development cycle.
Do you have further questions about BCBS239 and how also to achieve organization compliant with BCBS239? Do not hesitate to contact me!
Principles for effective risk data aggregation and risk reporting, Januar 2013, https://www.bis.org/publ/bcbs239.pdf
Rundschreiben 09/2017 (BA) – Mindestanforderungen an das Risikomanagement – MaRisk, 27.10.2017 https://www.bafin.de/SharedDocs/Veroeffentlichungen/DE/Rundschreiben/2017/rs_1709_marisk_ba.html?nn=8249098
Report on the Thematic Review on effective risk data aggregation and risk reporting, Mai 2018 https://www.bankingsupervision.europa.eu/ecb/pub/pdf/ssm.BCBS_239_report_201805.pdf