BCBS 239 Risk Data Aggregation and Reporting Challenges and Solutions

Transcription

1 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 Tuesday April 28, 2015 Info session in collaboration with Phone: +32 (0) Mobile: j.vanmalleghem@reply.eu

2 Introduction 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: 2

3 Contents Section Topic Page Numbers 1. Principles for effective risk data aggregation and risk reporting Implications 4 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 Contribute to decision-making process 13 Appendix About Avantage Reply 15 3

4 BCBS 239 Implications Enterprise-level 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 Accuracy Right time Right people Flexible Infrastructure Data Quality Reporting 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 Convey the right information Comprehensive, clear and useful Reconciliation on trade level 4

5 The challenge of implementing the Principles Challenges Complexity of Banks Mergers, Business Lines, Localisation Conduct Agenda Multiplication of requirements, definition of priorities Measuring Compliance The Principles are high-level, unquantified and nonprescriptive Balance Measurement I mplication Complexity Volume and complexity Number of transactions, clients and interdependencies between applications 5

6 A review of available solutions Solutions exist IT infrastructure Risk Accounting Data Warehouse Big Data Pros Ensures BCBS 239 compliancy is included in all functional and technical requirements Capitalise on existing accounting controls One source, reduced reconciliation issues Access to all information, on nonaggregated level Access to all information, on nonaggregated level Short implementation time Flexible Cons Cost and implementation time, risk Data lineage or lifecycle Risk and finance alignment Additional projects are needed (DQ..) Implementation time Risk and finance are by nature not aligned (timing, policies ) Risk, reliance on one chain Feasibility will depend on aligned data taxonomy Data for different needs cannot always be linked Feasibility will depend on aligned data taxonomy Additional projects are needed (DQ..) 6

7 Progress in implementing the Principles Assessment 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. Monitoring Controls Board-level implication Manual intervention Communication Challenges Dependence on manual workarounds Data dictionaries and data taxonomy Ability to create accurate and timely risk reports in periods of stress or crisis BCBS

8 Preparing for January Define Key data Ana Credit is coming, the ECB has highlighted key data to monitor 2 Understanding Source, transformations and manual interventions R C A I 3 Ownership Stakeholders, improve data quality by highlighting ownership gaps 4 Decision-making Ensure adequacy of reporting process, including data quality disclosures

9 Define key data COREP ICAAP Type Lender attributes Borrower attributes Credit data variables Attribute 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 AQR ANACREDIT Type Credit data measures Attribute Credit drawn Credit lines Arrears Collateral value Specific credit risk adjustment Risk-weighted assets Probability of default (IRB) Loss given default (IRB) 9

10 Data gap assessment 1 2 Translation of principles into clear data requirements A. 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 Conduct data gap assessment Reporting Source 10

11 Data ownership as a tool to improve data quality 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 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 11

12 Steering Framework Business IT Risk Finance Liquidity Building a data governance framework Responsible Responsibility Quality Accountable Accuracy Consulted Responsibility Informed Local Steering Committee Central Operating Committee Central Steering Committee Data coordinator or data officer Responsible to ensure data ownership is maintained, data transformation documented and data quality issues are monitored. Involved in project assessment and monitoring. 12

13 Reporting Ensuring adequacy of reports Define key reports, in line with risk profile Focus Analytical input Drive decision making People must concentrate on useful reports Reports must be comparable over time consistency Content and structure validation before preparation is initiated Enable drill-down Replacing PowerPoint by new solutions to increase time for analysis and accuracy control 13

14 Continuing the effort towards compliance Observations Understanding Ownership Involvement Measure Added Value Institutions understand added value of the Principles Board-level implication Close attention to BCBS 239 projects Improving data quality Creating employee awareness Decision-making process Improved through solutions and data quality awareness 14

15 Avantage Reply 15

16 Introduction to Avantage Reply 2004 Established in 2004, Avantage Reply is a pan- European specialised management consultancy OPERATIONS 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 RISK AND REGULATION 200 consultants who typically have a minimum of 6 years of experience in Financial Services FINANCE Member of Reply, a publicly- listed group, with EUR 627 million in sales, employing 4,600 consultants and technology-delivery service professionals TREASURY 16

17 Outstanding credentials in Financial Services Proven Credentials Our clients are large international financial institutions as well as specialised financial services Business Units within international groups. Delivery capabilities covering Advisory Services, Project Management, Business and Functional Analysis, Data Analysis. Delivery capabilities spanning across consulting (Avantage Reply) and technology (Reply Group). Specialised Management Consultancy Operations, Risk, Finance, Treasury Regulatory Expertise Retail & Corporate Banking Investment Banking & Capital Markets Investment Management & Investment Services 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. Risk Change & Technology Post-trading Service Providers 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

18 End-to-end Delivery Capabilities within a Half-a-Billion Euro Group 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. Avantage Reply and the Reply Group bring clients product knowledge and financial services experience coupled with technology delivery capabilities. Employee Growth between Total sales ( 560m in Q1, Q2 & Q3 of 2014) Total employees (4,600 in 2014) Euro (m) 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 18

19 Deep BCBS 239 Expertise Our regulatory publications and events with the regulators are available on our websites. The following illustrates some recent publications and events. 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 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. 19

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