Situation
The Basel Committee on Banking Supervision had stipulated a new regulatory standard. BCBS239, called the ‘Principles for Effective Risk Data, Aggregation and Reporting’ is meant to strengthen banks’ risk data aggregation capabilities and internal risk reporting practices, to enhance risk management and decision making at banks.
Our client, a major global investment bank had been earmarked – along with a number of its peers – as being non-compliant with the standard. The bank had been given a mandate to perform a self-assessment and define a target state. The self-assessment revealed a number of major shortfalls around data accuracy, a lack of controls around upstream and downstream data and the timeliness of data that was impacting control functions. These problems were leaving the bank wide open to a failure to comply with BCBS239 and subsequent fines.
Approach
Valcon was engaged to define an implementation plan to address the gaps in compliance and implement controls and reporting. Valcon deployed a team to review the gaps with the regulation and set KPIs that would define compliance criteria. The team also oversaw the implementation of T+1 data from front office systems via a new inbound data gateway that included data quality dashboards to assess compliance.
Valcon developed a new framework to monitor risk and finance alignment. The team also defined process controls to reduce manual data adjustments through data quality fixes. The team was also responsible for remediating multiple manual end user developed applications, to limit manual intervention and streamline data flows. As the programme was highly regulated, the team developed watertight governance, controls and reporting processes
Results
- Significant risk reduction: the data management measures the team put in place drastically reduced the bank’s risk exposure.
- Compliance adherence: the improvements in data quality, reporting and controls ensured the bank could align to the BCBS239 standard.
- Accuracy of trades and limit utilisation: remediation of business process reduced the percentage of unmapped trades and achieved the compliance threshold for missing limit utilisation.
- Resolving inaccuracies in data: finetuning and aggregating data sources ensured the accurate delivery of trading book data to credit risk officers and the reduction in time of delivering banking book data to credit risk officers (from 20 hours in 2018, to eight hours – T+1 – by project completion).
