General Summary
The Basel Committee on Banking Supervision has outlined 14 principles to enhance banks’ risk data aggregation and risk reporting capabilities, particularly systemically important banks (SIBs). The objective is to ensure banks can better manage financial risks by improving their data and IT infrastructures, governance frameworks, and risk reporting practices, ensuring robustness during regular crises.
Overarching Governance and Infrastructure
Strong Governance Framework: Banks must adhere to robust governance arrangements that ensure ownership and execution of the principles concerning risk data aggregation. This includes active board and senior management oversight in implementing and maintaining these practices.
Data Architecture and IT Infrastructure: Banks must develop and maintain an integrated data architecture and IT infrastructure that supports accurate and comprehensive risk data aggregation and reporting, even during stress and crises.
Risk Data Aggregation Capabilities
Accuracy and Integrity: Banks should generate accurate and reliable risk data, preferably through automated processes, to minimize errors. Manual processes should have adequate controls and precise documentation.
Comprehensive Data Capture: Institutions must ensure that all material risk data across the entire banking group is captured, aggregated, and made available by relevant categories such as business lines and legal entities to identify exposures and emerging risks efficiently.
Timeliness: promptly Generating up-to-date risk data is essential, especially during stress or crises. Banks need to meet various timing requirements based on the nature of the risks involved and their overall risk profile.
Adaptability and Flexibility
Flexible Data Aggregation: Banks should be able to adapt risk data aggregation processes to meet a broad range of ad hoc and on-demand risk management reporting needs, especially in response to internal changes, stress scenarios, and supervisory queries.
Risk Reporting Practices
Accurate and Reconciled Reports: Risk management reports must be accurate, precise, comprehensive, and reflect risk data. They should enable management and the board to make informed decisions confidently.
Comprehensive Coverage: Reports should cover all significant risk areas and provide detailed insights into exposures and concentrations. The depth of these reports should align with the bank’s size, complexity, and risk profile.
Clarity and Usefulness: Risk reports should be easy to understand and deliver meaningful, tailored information. A balanced inclusion of both quantitative data and qualitative analyses is necessary for effective decision-making.
Supervisory Review and Cooperation
Regular Supervisory Assessments: Supervisors must periodically review and evaluate compliance with the principles, involving independent reviews if needed. Practical cooperation between home and host supervisors helps address any cross-border issues and enhances oversight in a bank’s global operations.
Implementation Timeline
G-SIBs Timeline: Global Systemically Important Banks (G-SIBs) are expected to comply with these principles by January 2016. Continuous progress should be made from early 2013, with national supervisors monitoring and assessing this progress.
Resource
Principles for Effective Risk Data Aggregation and Risk Reporting
