In 2013, the Basel Committee on Banking Supervision (BCBS) released BCBS 239, a standard that sets out principles for effective risk data aggregation and risk reporting, contributing to the stability of the global financial system. Alongside the many other regulatory developments coming from the BCBS since the global financial crisis, it represents a highly significant financial policy development and is an important piece of the puzzle in managing risks at financial institutions. In pre-crisis years, risk management departments at financial institutions were frequently unable to fully evaluate risks and anticipate their impact across their institutions. The 14 principles are designed to help financial institutions address the shortcomings of their IT systems that resulted in failures of risk management systems in the years leading up to the global financial crisis of 2007/2008 (GFC). These principles equip financial institutions with the tools to maximise the potential of data produced in the process of complying with Basel III.
This paper will discuss the importance of BCBS 239 to other standards introduced by the BCBS since the GFC and in particular Basel III. It will then address several of the specific principles to highlight existing technological solutions that can help financial institutions overcome the challenges they are facing in the process of implementing BCBS 239. The key challenges revolve around data lineage and auditability, interoperability, and data standardisation. Research and practical use cases suggest that a risk data engine using an open-source data standard, such as FIRE (Suade, 2021), offers an effective solution to these challenges.
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