April 2015

BCBS 239 – Risk Data Aggregation and Reporting

Challenges and Solutions

Contact details:

Jonathan Van Malleghem

Avantage Reply

Congresstraat / Rue du Congres 5

B-1000 Brussels – Belgium

Phone: +32 (0) 2 88 00 32 0

Mobile: +32 471 671 020

E-mail: j.vanmalleghem@reply.eu

Tuesday April 28, 2015

Info session in collaboration with

Introduction

2

The objectives of today’s session are to:

1. Share our experience and the lessons we have learnt in assisting G-SIBs and D-SIBs in implementing

the Principles set out in BCBS 239; and

2. Share challenges faced by institutions and solutions available on the market;

Accordingly, the Slide Deck assumes that the participants have a robust understanding of the Principles.

Interested participants may find relevant background information on our website at:

www.reply.eu/en/industries/financial-services

Contents

Section Topic Page Numbers

1. Principles for effective risk data aggregation and risk reporting

Implications4

3. Implementation of the principles 5 – 7

Challenges 5

Solutions 6

Progress in implementing the principles 7

4. Preparing for 2016 – data governance framework through data gap assessment 8 – 13

Defining key data 9

Data gap assessment 10

Governance and ownership 11 – 12

Contribute to decision-making process 13

Appendix – About Avantage Reply 153

BCBS 239 – Implications

BCBS 239 requires implication from the institution as a whole and a complete review of

the reporting process, data quality and data infrastructure.

Governance • Robust governance arrangements

Infrastructure

Data Quality

• Flexible, ensure possibility to aggregate at

different levels

• Manual interventions should be limited

• Resilient to change

• Data quality must be a board-level issue

• Accurate and reliable

Reporting• Convey the right information

• Comprehensive, clear and useful

• Reconciliation on trade level

4

Enterprise-level

Accuracy

Right time

Right people

Flexible

The challenge of implementing the Principles

5

Complexity of BanksMergers, Business Lines, Localisation

Conduct AgendaMultiplication of requirements, definition of priorities

Measuring ComplianceThe Principles are high-level, unquantified and non-

prescriptive

Volume and complexityNumber of transactions, clients and

interdependencies between applications

Challenges

Balance

Measurement

I mp l i ca t i on

Complexity

6

A review of available solutions

Solutions exist

IT infrastructure• Ensures BCBS 239 compliancy is

included in all functional and technical

requirements

Pros Cons

• Cost and implementation time, risk

• Data lineage or lifecycle

• Risk and finance alignment

• Additional projects are needed (DQ..)

Data Warehouse• Access to all information, on non-

aggregated level

• Feasibility will depend on aligned data

taxonomy

• Data for different needs cannot always be

linked

Big Data• Access to all information, on non-

aggregated level

• Short implementation time

• Flexible

• Feasibility will depend on aligned data

taxonomy

• Additional projects are needed (DQ..)

Risk Accounting

• Capitalise on existing accounting

controls

• One source, reduced reconciliation

issues

• Implementation time

• Risk and finance are by nature not aligned

(timing, policies…)

• Risk, reliance on one chain

Progress in implementing the Principles

BCBS 308 - www.bis.org

• 16 institutions downgraded their compliance rating,

mainly due to delays or difficulties in initiating or

implementing large scale IT infrastructure projects

• Many banks will not reach the 2016 deadline –

execution risk

• The Basel Committee on Banking Supervision does not

intend to delay the implementation deadline.

Assessment

• Dependence on manual workarounds

• Data dictionaries and data taxonomy

• Ability to create accurate and timely risk reports in periods of stress or crisis

Challenges

5

Monitoring

Controls

Board-level implication

Manual intervention

Communication

Preparing for January 2016

1

2

3

Define Key dataAna Credit is coming, the ECB has highlighted key data to monitor

OwnershipStakeholders, improve data quality by highlighting ownership gaps

UnderstandingSource, transformations and manual interventions

4 Decision-makingEnsure adequacy of reporting process, including data quality disclosures

R

C

A

I

COREP

9

Type Attribute

Lender attributes Lender identifier

Borrower identifier

Country of residence

Institutional sector

Sector of economic

activity

Size

Loan identifier

Currency

Type of loan

Collateral type

Original maturity

Residual maturity

Non-performing status

Syndicated loan

Subordinated debt

Credit data

variables

Borrower attributes

Type Attribute

Credit drawn

Credit lines

Arrears

Collateral value

Specific credit risk adjustment

Risk-weighted assets

Probability of default (IRB)

Loss given default (IRB)

Credit data measures

Define key data

ICAAP

AQR

ANACREDIT

10

Data gap assessment

1 Translation of principles into clear data requirementsA. Ownership

B. Source and definitions – is the data definition aligned with central?

C. Transformation

• Understood?

• Systems

• Manual – Calculated – Mapping

D. Controls

E. Certification

F. Coverage and accuracy

2 Conduct data gap assessment

Reporting Source

11

Data ownership as a tool to improve data quality

• Data quality becomes a board-level issue

• Every investment in IT infrastructure will only deliver if data quality is ensured

• Data assessment is a prerequisite for any solution:

• Data lineage (reverse engineering)

• Data dictionaries and data taxonomy

• Data source understanding

Data Quality

Additional controls must be put in place

Often at the expense of automation and flexibility

People must be accountable – employee awareness

Governance must be reviewed and change management must be initiated

Appropriate conclusions must be taken

Shortcuts must be reduced to a minimum

Central defaulting rules must be reviewed and reduced

12

Building a data governance framework

Quality

Accuracy

Responsibility

Responsible

Accountable

Consulted

Informed

Responsibility

Bu

sin

ess

Ris

k

Fin

an

ce

…

Local Steering Committee

Central Operating Committee

Central Steering CommitteeSte

erin

g F

ram

ewor

k

IT

Liq

uid

ity

Data coordinator or data officerResponsible to ensure data ownership is maintained,

data transformation documented and data quality issues

are monitored.

Involved in project assessment and monitoring.

13

Define key reports, in line with risk profile

People must concentrate on useful reports

Reports must be comparable over time –consistency

Content and structure validation before preparation is initiated

Enable drill-down

Focus

Analytical input

Drive decision

making

Reporting – Ensuring adequacy of reports

Replacing PowerPoint by new solutions to increase time for analysis and accuracy control

14

Continuing the effort towards compliance

Understanding

Ownership

Involvement

Measure

Added ValueInstitutions understand added value of the Principles

Board-level implicationClose attention to BCBS 239 projects

Improving data qualityCreating employee awareness

Observations

Decision-making processImproved through solutions and data quality

awareness

Avantage Reply

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Introduction to Avantage Reply

2004 OPERATIONS

RISK AND

REGULATION

FINANCE

TREASURY

Established in 2004, Avantage Reply is a pan-

European specialised management consultancy

delivering change initiatives in Compliance, Risk,

Finance and Treasury

Rapidly Growing Pan-European Firm

Avantage Reply employs 200 consultants within

our 12 offices across Europe and the UK

200 consultants who typically have a minimum of

6 years of experience in Financial Services

Member of Reply , a publ ic ly - l isted group,

with EUR 627 million in sales, employing 4,600

consultants and technology-delivery service

professionals

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Delivery capabilities spanning

across consulting (Avantage Reply)

and technology (Reply Group).

Delivery capabilities covering Advisory

Services, Project Management, Business

and Functional Analysis, Data Analysis.

Outstanding credentials in Financial Services

Our clients are large international

financial institutions as well as

specialised financial services Business

Units within international groups.

Proven Credentials

Specialised Management Consultancy

Operations, Risk,

Finance, Treasury

Regulatory Expertise

Risk Change & Technology

Retail & Corporate Banking

Investment Banking

& Capital Markets

Investment Management

&

Investment Services

Post-trading

Service Providers

ABN Amro, Barclays BIL, BNP Paribas, Deutsche Bank, GE Money,

ING, Intesa Sanpaolo, Lloyds Banking Group, Marex Spectron,

Morgan Stanley, PayPal, RBS, Société Générale, UBS, UniCredit,

etc.

BPSS, BNY Mellon, CACEIS, J.P. Morgan Investor Services, RBC

Investor Services, State Street, etc.

Alliance Bernstein, MAN Group,

Rothschild, etc.

Clearstream, Euroclear, Ice Clear, etc.

Proven track record in delivering

pragmatic solutions to our clients.

Operate in small delivery-focused teams in collaboration

with the client to ensure transfer of knowledge.

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Avantage Reply and the Reply Group bring clients product

knowledge and financial services experience coupled with

technology delivery capabilities.

Since early 2011, Avantage Reply has been a member firm of Reply, a pan-European group specialised

in consulting, systems integration, service management and business process outsourcing. As such,

Avantage Reply can provide clients with support from the initial phase of the project to its completion,

including technology and operational implementation, if required.

Overview of the Reply Group End-to-end Delivery Capabilities

Pan-European publicly-listed Group, established in 1996,

with offices in 19 European cities, Brazil and the US.

End-to-end Delivery Capabilities

within a Half-a-Billion Euro Group

Total employees (4,600 in 2014)

Total sales (€560m in Q1, Q2 & Q3 of 2014)

Growth between 2002 - 2014Employee Euro (m)

2002 2014

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Op,

Risk,

Finance

& Treasury

Advisory

Business

architecture design

Process and organisation design

and implementation

IT architecture design and

component selection

Systems integration and technology solutions

implementation

Where expertise meets technology

Our regulatory publications and events with the regulators are available on our websites. The

following illustrates some recent publications and events.

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18 December 2014: Avantage Reply, together with the Dutch Banking Association

(NVB) organised an industry debate luncheon around BCBS 239, Risk Data

Aggregation and Risk Reporting, with representatives from the DNB, and FSB.

http://www.reply.eu/en/industries/financial-services

24 September 2014: Avantage Reply presented its ‘Pragmatic guide to BCBS 239

compliance: Inventorise, Connect and Control’ at the Regulatory Risk Summit in

London. BCBS 239 explicitly challenges the silo driven structure of firms today with

clear requirements to bring a holistic enterprise understanding of risk data, risk data

aggregation and reporting.

http://www.reply.eu/en/industries/financial-services

Deep BCBS 239 Expertise

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