New Urgency For Data Aggregation

Last week in this space, I posed the question of what the impact would be of a likely delay to implementation of the Basel III capital adequacy proposal. Aside from other questions coming out of Basel [the town rather than its namesake regulation proposal] this past week about the legal entity identifier, the Basel Committee on Banking Supervision's (BCBS) recent risk data and reporting consultation paper is raising the prospect of still more demands on data operations in financial services.

BCBS has set out a timeline for global systemically important banks (G-SIBs), beginning with self-assessment in 2013 and leading to completed risk data aggregation and risk reporting by 2016. A Deloitte report on the requirements of this three-year process points to management roles, changes needed in processes and technology, and improvements in data quality.

Data supporting risk metrics, coming from counterparty data, legal entity hierarchies, book data, trade data and pricing, must be "of sufficient quality," the authors of the report say. G-SIBs' relevant reference data is shared across numerous functions, they stress, and needs an accountable owner who can make needed changes in process and technology. That points to getting the data problem addressed at the chief executive level of the G-SIBs, according to the Deloitte report, with a chief data officer—or at least for those that do not have a CDO, a chief technology officer or chief information officer—who appreciates the importance of data in this effort.

Regardless of what path G-SIBs choose to comply with BCBS-mandated risk data aggregation requirements, the Deloitte authors stress that the BCBS consultation paper is a wake-up call to those firms to assess their risk operating models and data management functions. Those that do so first and best will have a competitive advantage.