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How can banks meet the challenge of BCBS 239?

Martijn Groot

The evening of Wednesday 18th March saw us combine with PRMIA – The Professional Risk Managers’ Association – to hold a panel discussion on the topic of BCBS 239: How can banks meet the challenge, inviting delegates from the risk management space to converge and converse on the regulatory matters at hand, including:

  • The strategic benefits of BCBS 239
  • How banks are handling the implementation process
  • The need for a common source of data
  • The ontological approach

More than 100 attendees descended on the British Bankers’ Association to witness panel members from the Bank of England, Santander, Nordea Bank, and Alveo thrash it out on risk’s hottest subject, with moderation from Kathryn Kerle, Head of Enterprise Risk Reporting at Royal Bank of Scotland.

Each panellist shared their valuable experience on the subject of regulatory compliance, with audience members posing questions and engaging in the discussion.

The Basel Committee on Banking Supervision’s “Principles for effective risk data aggregation and risk reporting.” aimed to improve the way that banks process risk data. Its 14 principles, as the panellists made clear, aim to instate fundamental changes in bank operations.

The key takeaways from the event reflected a sense of positivity about how compliance with BCBS 239 could benefit banks’ business practices, giving a “complete perspective”.

These included:

  • Gaining competitive advantage
  • Lowering costs
  • Provoking enhanced attitudes towards risk and governance

The panellists agreed that this could then lead to better risk management and confident economic decisions, by way of more efficient processes, establishing a data dictionary with commonly accepted terms, and cohesion between internal teams.

“One common base model” was a term used regularly in the discussion, with the concept of “one idea of the truth” being integral to banks’ progression and compliance. The maintenance of this – the “legacy of ongoing compliance” – would then be based on consistency: consistent measures for each different risk type, with single data sources for each.

Organisational challenges were also at the core of the debate. This involved the need for teams to work together, for structures to be reconfigured and in particular for IT and the business to be in tandem. By focusing on the end result, panellists argued – both for BCBS 239 compliance and projects in general –  the number of required tasks could be reduced, when working alongside IT teams.

Without the support of key business owners and teams, and appropriate knowledge transfer, compliance will be a problematic objective, so it is important for risk managers to obtain the right sponsorship as early as possible, with the relevant key stakeholder engagement. This can be done by showing how efficiencies gained through compliance will positively impact the bank in the future.

One example of good stakeholder engagement emphasised by the panel was actively highlighting to the appropriate people the speed at which new products could be taken to market thanks to BCBS compliance. The ‘what’s in it for me?’ approach: individually tailoring your technique to each department/stakeholder with evidence on how compliance would support their efforts.

Later, when the floor was opened for questions, attendees displayed a diverse range of perspectives. One question that caused a stir referred to data management processes – questioning why banks aren’t looking at data in the same way that Google or Facebook do. The answer? In many ways they already do. This could describe current ontological processes and procedures used by certain institutions. But, overall, the specific nature of bank data and the intricate requirements of end users entail the ‘broad church’ focus of a search engine or social network not fitting the bill.

Whether compliance with BCBS 239 by January 2016 is realistically possible for G-SIBs will remain to be seen – but one thing is for sure; it is well and truly on the agenda for 2015 and beyond.

Thanks to all involved for an insightful and enjoyable event.