In today’s banking world, decisions based on data are central to business success. This development enables innovative ways of adding value and is essential for optimizing operational processes. Efficient management and use of this data is not only critical for operational efficiency, but also for robust risk management. Regulatory bodies have recognized the importance of these developments and have issued specific regulations, such as BCBS 239, to meet these new requirements.
Despite the introduction of this regulatory framework back in 2013, supervisory authorities are still identifying significant structural deficiencies in implementation at many banks. In response, the European Central Bank (ECB) published the Guide to Effective Risk Data Aggregation and Reporting (RDARR) in July 2023, which contains clearly formulated implementation expectations that have already been discussed in previous best practice publications. This was aimed at improving the progress of implementation, which in the view of the supervisory authorities has so far been insufficient. The final guide was published on May 3, 2024, taking into account the feedback from the consultation phase with market participants.
For better readability, we at fink. have broken down the requirements of the supervisory authority into three central areas, which the regulator is particularly targeting with this publication:
Dedicated strategic support and relevance at Management Board level
Objective: Relevance and assertiveness to continuously improve data aggregation capabilities and data quality
Competence equipment of the 3-Lines-of-Defense (LoD)
Objective: Appropriate and functional governance framework
Comprehensive coverage of bank management
Objective: Group-wide uniformity of the procedures applied
Embedding the DQ results in bank management
Objective: Consideration of the impact of DQ errors on the information quality of management-relevant key figures
Implementation of DQ rules and DQ reporting
Objective: Holistic, automated measurement and control of data quality
Minimization of error susceptibility through improved process documentation and IT integration
Objective: Reduction of error susceptibility
Adequacy of the bank management architecture for stress situations
Objective: Modernization of the IT architecture to enable timely and granular reporting even in times of crisis
Complete overview of the technical context of bank architecture
Objective: Disclosure of harmonization and optimization potentials as well as transparency regarding technical correlations for deriving DQ implications
New technologies for adaptable and efficient control
Objective: Changes can be made quickly, cost-effectively and in a modular fashion
BCBS239 initiatives are often focused purely on the fulfillment of regulatory requirements (“check-box” mentality). The use of the scope to create concrete added value for the bank is often neglected. A long-term strategy to improve RDARR capacities while achieving cost reductions cannot be achieved through singular, uncoordinated “tactical” measures. In order to avoid such inefficiencies, holistic transformations are usually necessary, but these are rarely found in the current market or are not pursued with the necessary consistency.
In the feedback statement also published by the ECB on the feedback from the consultation phase of the ECB draft, the supervisory authority’s expectations of a holistic approach based on an integrated data architecture are once again emphasized. As a first step, institutions should gain clarity about the key activities that are necessary for them.
At fink. we have a comprehensive transformation framework and concrete project experience in the implementation of RDARR requirements. We support you in the classification of the RDARR requirements, the implementation of efficient measures for your institution and in the preparation and monitoring of on-site inspections (OSIs) by the supervisory authorities.
