NAFIS 2015: Panel Describes Struggle to Define BCBS 239 Risk Data Rules

The Basel Committee first released regulation BCBS 239 covering Effective Risk Data Aggregation & Risk Reporting in January 2013, outlining 11 risk data aggregation principles that firms must comply with by Jan. 1, 2016, as part of a review to identify the causes of the 2008 global financial crisis, and to understand how to prevent a second crisis. 

But unlike previous mandates from the Committee, which have been highly prescriptive—for example, those around counterparty risk—BCBS 239 is more like a set of guidelines than actual rules, said panelists at the North American Financial Information Summit.

“In the past, the Basel Committee has been prescriptive and very definitional when it imposes regulation, but BCBS 239 is a major shift, as it’s more guidelines and principles,” said Rick Kanungo, senior director of enterprise solutions at S&P Capital IQ. “What it means is that we have to come up with the answer, but we don’t know what the solution should look like.”

The first step towards being compliant with BCBS 239 is to create a framework for what compliance will look like—for example, how the regulations should be interpreted, and who will take responsibility for compliance within each firm—and then secondly, to consider how the data architecture needs to be redesigned, said Manash Banerjee, executive director and head of reference data strategic technology delivery at Nomura. “Firms need to come up with a way to separate out different risk datasets—such as entity data, limit data and transaction data—and determine which sources are going to be the sole provider of that information across the enterprise.”

Meanwhile, vendors can also take steps to help firms comply with BCBS 239, said Alex Tsigutkin, chief executive of Axiom SL. For example, vendors can provide the ability to trace data from its source to each end point, since firms struggle to visualize every point in the process that touches data. “This will resolve BCBS 239 and related issues…. Firms need to sort out structural problems like this first,” he said.