bcbs 239 risk data aggregation and reporting · 4/28/2015 · 24 september 2014: avantage reply...
TRANSCRIPT
April 2015
BCBS 239 – Risk Data Aggregation and Reporting
Challenges and Solutions
Contact details:
Jonathan Van Malleghem
Avantage Reply
Congresstraat / Rue du Congres 5
B-1000 Brussels – Belgium
Phone: +32 (0) 2 88 00 32 0
Mobile: +32 471 671 020
E-mail: [email protected]
Tuesday April 28, 2015
Info session in collaboration with
Introduction
2
The objectives of today’s session are to:
1. Share our experience and the lessons we have learnt in assisting G-SIBs and D-SIBs in implementing
the Principles set out in BCBS 239; and
2. Share challenges faced by institutions and solutions available on the market;
Accordingly, the Slide Deck assumes that the participants have a robust understanding of the Principles.
Interested participants may find relevant background information on our website at:
www.reply.eu/en/industries/financial-services
Contents
Section Topic Page Numbers
1. Principles for effective risk data aggregation and risk reporting
Implications4
3. Implementation of the principles 5 – 7
Challenges 5
Solutions 6
Progress in implementing the principles 7
4. Preparing for 2016 – data governance framework through data gap assessment 8 – 13
Defining key data 9
Data gap assessment 10
Governance and ownership 11 – 12
Contribute to decision-making process 13
Appendix – About Avantage Reply 153
BCBS 239 – Implications
BCBS 239 requires implication from the institution as a whole and a complete review of
the reporting process, data quality and data infrastructure.
Governance • Robust governance arrangements
Infrastructure
Data Quality
• Flexible, ensure possibility to aggregate at
different levels
• Manual interventions should be limited
• Resilient to change
• Data quality must be a board-level issue
• Accurate and reliable
Reporting• Convey the right information
• Comprehensive, clear and useful
• Reconciliation on trade level
4
Enterprise-level
Accuracy
Right time
Right people
Flexible
The challenge of implementing the Principles
5
Complexity of BanksMergers, Business Lines, Localisation
Conduct AgendaMultiplication of requirements, definition of priorities
Measuring ComplianceThe Principles are high-level, unquantified and non-
prescriptive
Volume and complexityNumber of transactions, clients and
interdependencies between applications
Challenges
Balance
Measurement
I mp l i ca t i on
Complexity
6
A review of available solutions
Solutions exist
IT infrastructure• Ensures BCBS 239 compliancy is
included in all functional and technical
requirements
Pros Cons
• Cost and implementation time, risk
• Data lineage or lifecycle
• Risk and finance alignment
• Additional projects are needed (DQ..)
Data Warehouse• Access to all information, on non-
aggregated level
• Feasibility will depend on aligned data
taxonomy
• Data for different needs cannot always be
linked
Big Data• Access to all information, on non-
aggregated level
• Short implementation time
• Flexible
• Feasibility will depend on aligned data
taxonomy
• Additional projects are needed (DQ..)
Risk Accounting
• Capitalise on existing accounting
controls
• One source, reduced reconciliation
issues
• Implementation time
• Risk and finance are by nature not aligned
(timing, policies…)
• Risk, reliance on one chain
Progress in implementing the Principles
BCBS 308 - www.bis.org
• 16 institutions downgraded their compliance rating,
mainly due to delays or difficulties in initiating or
implementing large scale IT infrastructure projects
• Many banks will not reach the 2016 deadline –
execution risk
• The Basel Committee on Banking Supervision does not
intend to delay the implementation deadline.
Assessment
• Dependence on manual workarounds
• Data dictionaries and data taxonomy
• Ability to create accurate and timely risk reports in periods of stress or crisis
Challenges
5
Monitoring
Controls
Board-level implication
Manual intervention
Communication
Preparing for January 2016
1
2
3
Define Key dataAna Credit is coming, the ECB has highlighted key data to monitor
OwnershipStakeholders, improve data quality by highlighting ownership gaps
UnderstandingSource, transformations and manual interventions
4 Decision-makingEnsure adequacy of reporting process, including data quality disclosures
R
C
A
I
COREP
9
Type Attribute
Lender attributes Lender identifier
Borrower identifier
Country of residence
Institutional sector
Sector of economic
activity
Size
Loan identifier
Currency
Type of loan
Collateral type
Original maturity
Residual maturity
Non-performing status
Syndicated loan
Subordinated debt
Credit data
variables
Borrower attributes
Type Attribute
Credit drawn
Credit lines
Arrears
Collateral value
Specific credit risk adjustment
Risk-weighted assets
Probability of default (IRB)
Loss given default (IRB)
Credit data measures
Define key data
ICAAP
AQR
ANACREDIT
10
Data gap assessment
1 Translation of principles into clear data requirementsA. Ownership
B. Source and definitions – is the data definition aligned with central?
C. Transformation
• Understood?
• Systems
• Manual – Calculated – Mapping
D. Controls
E. Certification
F. Coverage and accuracy
2 Conduct data gap assessment
Reporting Source
11
Data ownership as a tool to improve data quality
• Data quality becomes a board-level issue
• Every investment in IT infrastructure will only deliver if data quality is ensured
• Data assessment is a prerequisite for any solution:
• Data lineage (reverse engineering)
• Data dictionaries and data taxonomy
• Data source understanding
Data Quality
Additional controls must be put in place
Often at the expense of automation and flexibility
People must be accountable – employee awareness
Governance must be reviewed and change management must be initiated
Appropriate conclusions must be taken
Shortcuts must be reduced to a minimum
Central defaulting rules must be reviewed and reduced
12
Building a data governance framework
Quality
Accuracy
Responsibility
Responsible
Accountable
Consulted
Informed
Responsibility
Bu
sin
ess
Ris
k
Fin
an
ce
…
Local Steering Committee
Central Operating Committee
Central Steering CommitteeSte
erin
g F
ram
ewor
k
IT
Liq
uid
ity
Data coordinator or data officerResponsible to ensure data ownership is maintained,
data transformation documented and data quality issues
are monitored.
Involved in project assessment and monitoring.
13
Define key reports, in line with risk profile
People must concentrate on useful reports
Reports must be comparable over time –consistency
Content and structure validation before preparation is initiated
Enable drill-down
Focus
Analytical input
Drive decision
making
Reporting – Ensuring adequacy of reports
Replacing PowerPoint by new solutions to increase time for analysis and accuracy control
14
Continuing the effort towards compliance
Understanding
Ownership
Involvement
Measure
Added ValueInstitutions understand added value of the Principles
Board-level implicationClose attention to BCBS 239 projects
Improving data qualityCreating employee awareness
Observations
Decision-making processImproved through solutions and data quality
awareness
Avantage Reply
15
Introduction to Avantage Reply
2004 OPERATIONS
RISK AND
REGULATION
FINANCE
TREASURY
Established in 2004, Avantage Reply is a pan-
European specialised management consultancy
delivering change initiatives in Compliance, Risk,
Finance and Treasury
Rapidly Growing Pan-European Firm
Avantage Reply employs 200 consultants within
our 12 offices across Europe and the UK
200 consultants who typically have a minimum of
6 years of experience in Financial Services
Member of Reply , a publ ic ly - l isted group,
with EUR 627 million in sales, employing 4,600
consultants and technology-delivery service
professionals
16
Delivery capabilities spanning
across consulting (Avantage Reply)
and technology (Reply Group).
Delivery capabilities covering Advisory
Services, Project Management, Business
and Functional Analysis, Data Analysis.
Outstanding credentials in Financial Services
Our clients are large international
financial institutions as well as
specialised financial services Business
Units within international groups.
Proven Credentials
Specialised Management Consultancy
Operations, Risk,
Finance, Treasury
Regulatory Expertise
Risk Change & Technology
Retail & Corporate Banking
Investment Banking
& Capital Markets
Investment Management
&
Investment Services
Post-trading
Service Providers
ABN Amro, Barclays BIL, BNP Paribas, Deutsche Bank, GE Money,
ING, Intesa Sanpaolo, Lloyds Banking Group, Marex Spectron,
Morgan Stanley, PayPal, RBS, Société Générale, UBS, UniCredit,
etc.
BPSS, BNY Mellon, CACEIS, J.P. Morgan Investor Services, RBC
Investor Services, State Street, etc.
Alliance Bernstein, MAN Group,
Rothschild, etc.
Clearstream, Euroclear, Ice Clear, etc.
Proven track record in delivering
pragmatic solutions to our clients.
Operate in small delivery-focused teams in collaboration
with the client to ensure transfer of knowledge.
17
Avantage Reply and the Reply Group bring clients product
knowledge and financial services experience coupled with
technology delivery capabilities.
Since early 2011, Avantage Reply has been a member firm of Reply, a pan-European group specialised
in consulting, systems integration, service management and business process outsourcing. As such,
Avantage Reply can provide clients with support from the initial phase of the project to its completion,
including technology and operational implementation, if required.
Overview of the Reply Group End-to-end Delivery Capabilities
Pan-European publicly-listed Group, established in 1996,
with offices in 19 European cities, Brazil and the US.
End-to-end Delivery Capabilities
within a Half-a-Billion Euro Group
Total employees (4,600 in 2014)
Total sales (€560m in Q1, Q2 & Q3 of 2014)
Growth between 2002 - 2014Employee Euro (m)
2002 2014
18
Op,
Risk,
Finance
& Treasury
Advisory
Business
architecture design
Process and organisation design
and implementation
IT architecture design and
component selection
Systems integration and technology solutions
implementation
Where expertise meets technology
Our regulatory publications and events with the regulators are available on our websites. The
following illustrates some recent publications and events.
19
18 December 2014: Avantage Reply, together with the Dutch Banking Association
(NVB) organised an industry debate luncheon around BCBS 239, Risk Data
Aggregation and Risk Reporting, with representatives from the DNB, and FSB.
http://www.reply.eu/en/industries/financial-services
24 September 2014: Avantage Reply presented its ‘Pragmatic guide to BCBS 239
compliance: Inventorise, Connect and Control’ at the Regulatory Risk Summit in
London. BCBS 239 explicitly challenges the silo driven structure of firms today with
clear requirements to bring a holistic enterprise understanding of risk data, risk data
aggregation and reporting.
http://www.reply.eu/en/industries/financial-services
Deep BCBS 239 Expertise
20