AxiomSL, a provider of regulatory reporting and risk management solutions, has combined functionality of its ControllerView platform to support clients that must comply with the Basel Committee on Banking Supervision’s regulation 239: Principles for Effective Risk Data Aggregation and Risk Reporting.
BCBS 239 includes a series of 14 principles providing guidance on how banks should manage and govern data. The principles are grouped into four areas covering governance and infrastructure, risk data aggregation, risk reporting and supervisory review, and are aimed to improve the ability of banks to identify and manage risk. While the outcome is laudable, achieving compliance is difficult as it requires the integration of finance and risk data to provide one version of validated and complete data that can be used many times in different systems.
Tony Sarkis, director, account management EMEA at AxiomSL, explains: “The principles of BCBS 239 must be applied to both risk and finance data. Traditionally, banks have good control of finance data, but risk data is more fluid and is used in many systems and controlled and owned by many users. BCBS 239 forces the integration of data and requires one version of trade data that can be used many times.”
Sarkis describes the lack of data clarity that can be caused, for example, by a trader updating the price of a trade that is already in a trading system. This can lead to the same trade having different timestamps and valuations in different systems. Sarkis says: “The governance principles of BCBS 239 are designed to avoid this. They talk about versioning, accurate reconciliation, availability of data and completeness.”
The principles covering risk aggregation and reporting include issues of unified naming conventions, the quality of risk data and responsibility for, and ownership of, data, the latter bringing accountability to the forefront of data management.
Considering all the governance and risk principles, Sarkis says: “Banks must ensure their policies, procedures and data governance adhere to the principles. They must ensure data is controlled, owned, frequent and accurate. While these are objective requirements, how they reach them is subjective.”
AxiomSL has championed the data control and governance concepts enshrined in the principles of BCBS 239 for some time and includes them in its ControllerView platform for regulatory reporting and financial control, making it able to support firms that must comply with the regulatory principles. Sarkis explains: “The AxiomSL solution standardises and stores data from sources such as trade, settlement, risk management, legal and finance systems. It then validates, reconciles and controls the data until it matches the ledger and is complete. The data can then be used by other systems, perhaps for regulatory reporting, stress testing or capital requirements, or for internal monitoring and management.”
As banks identified by the Financial Stability Board as global systemically important prepare for the January 2016 introduction of BCBS 239, Sarkis suggests that BCBS 239 best practice can best be achieved using third-party services such as ControllerView that are constantly updated as regulations change and provide a more cost-effective proposition than internal solutions.