The Basel Committee on Banking Supervision (BCBS) published its latest progress report on banks’ implementation of the Principles for effective risk data aggregation and risk reporting, commonly referred to as BCBS 239. The Principles were published in January 2013 in response to the global financial crisis. They were designed to strengthen risk data aggregation and risk reporting practices at global systemically important banks (G-SIBs, or banks) with the goal of improving the banks’ risk management practices, decision-making processes, and resolvability. At that time, thirty institutions across 12 jurisdictions were designated as G-SIBs; they were expected to adopt the Principles by January 2016. The current June 2018 report finds that only three of the thirty G-SIBs achieved full compliance by year-end 2017 and most others made limited progress toward implementation during that year. These findings follow the BCBS’s March 2017 report, which found an “unsatisfactory” degree of implementation during 2016.
The BCBS reports that only one G-SIB met the 2016 compliance deadline and that most banks are struggling with timelines that will reach beyond 2018. Three main reasons for the extended compliance timelines are identified in the report:
The BCBS also attributes the extended compliance timeline to banks’ failure to comply with Principles 1 and 2 (covering governance, data architecture, and IT infrastructure), which BCBS considers preconditions for complying with the remaining Principles.
The BCBS states that although banks now have in place implementation roadmaps assessed by their supervisors, they continue to experience difficulties in implementing the Principles across an entire banking group, as the international scale of G-SIBs’ operations creates challenges in consistency. Banks have also had difficulties in managing the interdependencies between risk data aggregation and risk reporting and other bank-wide strategic projects, as the interdependencies between these projects may complicate their implementation of the Principles.
Some supervisors have reportedly told G-SIBs that their compliance with the Principles will be factored into an overall supervisory review, which could potentially lead to a higher Pillar II capital add-on. In the U.S., the Principles are generally reflected in, and evaluated as part of, the Federal Reserve Board’s Comprehensive Capital Analysis and Review (CCAR) and the Office of the Comptroller of the Currency’s Heightened Standards.
The BCBS has outlined three new recommendations but notes that the recommendations in its previous progress reports continue to be relevant as the identified challenges persist.