On the surface, both activities may seem simple and straightforward: envision what you want, outline objectives to be met, and then build according to a simple set of rules. However, whether creating a framework to address risk weights for credit exposures or the framing of a dream house, the key is not to be caught off guard.

In the classic film Mr. Blandings Builds His Dream House, Mr. Blandings is caught off guard and pays the price – both situationally and financially. While unexpected scenarios may be humorous onscreen, being unprepared for regulations that affect multiple reporting schedules across jurisdictions and can result in inefficient or inaccurate risk weighting and capital allocation is not so amusing. Therefore, financial institutions may be asking themselves critical questions as they assign risk weights for credit exposures, including:

· What happens if a customer has 3 loans on 4 properties that are a mix of residential, commercial, buy-to-let, and other types?

· Must all loans be treated as commercial or can the allocation of collateral be segregated and/or optimised?

· What if repayment of the loan on residential property depends on cash flow generated from the property?

Building Standards To Address Regional Intricacies And Jurisdictional Nuances

To address these important questions and others, it is essential that organisations build a data standard infrastructure that includes governance, controls, and the Cloud, for example, and seamlessly maps/ingests/aggregates disparate source data while quickly and accurately adapting to regulatory changes. Just as standards for things like materials, design, and health and safety guidelines are required when constructing a dream house, or any home at all for that matter, FIRE (Financial Regulatory Data Standard) provides firms with a harmonised data standard, enabling a transparent understanding of their data.

For homes, standards provide consumers with confidence that their houses are structurally sound, can withstand an engineering inspection, and will not blow away during the first storm of the season. For financial firms, the power of FIRE enables a simplified and harmonised system and a single framework with trustworthy data and processes that delivers standardised data for risk and regulatory reporting.

Continue reading here for insights into how FIRE delivers harmonised data and enables confident risk weighting of credit exposures.