Basel Committee's Next Steps

The implementation of Basel III capital adequacy regulation introduced in 2010 is expected to stretch out through 2019. The multi-national Basel Committee on Banking Supervision (BCBS) that drafted the rules and its preceding versions, Basel I and II, is still filling in missing details of the rules concerning the handling of risk-weighted assets.

Basel III's origins are the BCBS's dismay that the 2008 financial crisis showed that Basel I and II were insufficient for ensuring capital adequacy throughout major global financial firms. This explains a key element of Basel III—moving risk management away from the value-at-risk method and toward shortfall calculations, which makes firms' management accountable for the quality of data. As a result, data managers have to dive deeper into infrastructure to understand data lineage and the quality of data systems. This requires IT staffs to collaborate with business and data management professionals in their firms.

Despite sometimes muddled specifics within previous Basel III guidance issued at points during 2013, the overall thrust of the regulation appears to be on target regarding the risk issues of concern and importance. During the latter half of 2013, the BCBS showed that it is thinking about the way data is collected and managed in relation to risk restrictions. But the mission is incomplete. Don't be surprised if the BCBS comes back with more specifics on Basel III this year.