ECB launches public consultation on risk management guide
27 July 2023 Germany
Image: Andrii Yalanskyi/stock.adobe.com
The European Central Bank (ECB) has launched a public consultation regarding its guide on effective risk data aggregation and risk reporting.
As part of the process, a stakeholder meeting with the participation of supervised institutions and interested parties will be held. The consultation period will end 6 October 2023.
The guide is part of a broader initiative from the ECB, which aims to help supervised banks identify and make progress around their risk data aggregation structural shortcomings. Rather than replacing existing guidance, the guide seeks to specify and reinforce supervisory expectations.
Seven areas that require robust governance and effective risk identification, monitoring and reporting processes are identified in the guide, including the responsibility of a bank’s management body, the scope of application of data governance frameworks and key roles and responsibilities for data governance.
Group-wide integrated data architectures, effective data quality controls, the timeliness of internal risk reporting and overall implementation programmes are also key, the ECB says.
The ECB states that banks need to improve their risk data aggregation frameworks, particularly following the Basel Committee on Banking Supersvision’s Principles for effective risk data aggregation and risk reporting (BCBS 239). It adds that effective management and aggregation of data will allow banks to improve their decision making and risk governance.
By following the guide, the ECB aims to support banks in their identification and management of group-wide risk consultations on the basis of quality data, a practice that the ECB reports has proved successful in a number of crisis situations.
Commenting on the announcement, Charlie Browne, head of market data, risk and quant solutions at GoldenSource, says: “Fully governed risk data aggregation and risk reporting (RDARR) is achievable; however, the legacy siloed risk technology landscape, with which many banks have tried to make-do since the financial crisis, continues to stand in the way.
"Now is the perfect moment for the ECB and ESMA to further encourage banks to convert their long-held intentions around data governance, quality, and availability into actions. A systems landscape from yesteryear will no longer be able to keep up. In order to effectively adapt, regulators and banks need to embrace the fact that a standardised approach to risk data management based on modern architecture is the way forward.”
As part of the process, a stakeholder meeting with the participation of supervised institutions and interested parties will be held. The consultation period will end 6 October 2023.
The guide is part of a broader initiative from the ECB, which aims to help supervised banks identify and make progress around their risk data aggregation structural shortcomings. Rather than replacing existing guidance, the guide seeks to specify and reinforce supervisory expectations.
Seven areas that require robust governance and effective risk identification, monitoring and reporting processes are identified in the guide, including the responsibility of a bank’s management body, the scope of application of data governance frameworks and key roles and responsibilities for data governance.
Group-wide integrated data architectures, effective data quality controls, the timeliness of internal risk reporting and overall implementation programmes are also key, the ECB says.
The ECB states that banks need to improve their risk data aggregation frameworks, particularly following the Basel Committee on Banking Supersvision’s Principles for effective risk data aggregation and risk reporting (BCBS 239). It adds that effective management and aggregation of data will allow banks to improve their decision making and risk governance.
By following the guide, the ECB aims to support banks in their identification and management of group-wide risk consultations on the basis of quality data, a practice that the ECB reports has proved successful in a number of crisis situations.
Commenting on the announcement, Charlie Browne, head of market data, risk and quant solutions at GoldenSource, says: “Fully governed risk data aggregation and risk reporting (RDARR) is achievable; however, the legacy siloed risk technology landscape, with which many banks have tried to make-do since the financial crisis, continues to stand in the way.
"Now is the perfect moment for the ECB and ESMA to further encourage banks to convert their long-held intentions around data governance, quality, and availability into actions. A systems landscape from yesteryear will no longer be able to keep up. In order to effectively adapt, regulators and banks need to embrace the fact that a standardised approach to risk data management based on modern architecture is the way forward.”
NO FEE, NO RISK
100% ON RETURNS If you invest in only one asset servicing news source this year, make sure it is your free subscription to Asset Servicing Times
100% ON RETURNS If you invest in only one asset servicing news source this year, make sure it is your free subscription to Asset Servicing Times
