BCBS 239 Implementation and Regulatory Expectations
The principles for effective risk data aggregation and risk reporting (BCBS 239) have been under scrutiny, especially after a critical 2018 review by the European Central Bank (ECB), which identified deficiencies in data quality, completeness, and reporting transparency among European banks. The ongoing supervisory review processes have consistently highlighted these shortcomings.
In 2023, the ECB released a consultation paper that laid out recommendations to improve BCBS 239 compliance, with the final version published in May 2024. Key focus areas include enhanced data governance frameworks, transparency of data quality controls, and board-level involvement in data management.
A short overview over the main components of the updated approach:
Management Involvement
Prioritization of RDARR (Risk Data Aggregation and Risk Reporting) activities is crucial. Boards are responsible for the implementation and must ensure the availability of adequate resources and define clear escalation paths.
Scope Expansion
BCBS 239 principles should extend across all relevant bank reporting, risk models, and key risk indicators.
Effective Governance Structures
Establish robust data governance with clear data ownership, leveraging independent validation functions.
Data Architecture
A consolidated IT infrastructure is essential for consistent data aggregation, eliminating manual adjustments, and ensuring comprehensive data lineage. A complete and granular lineage needs to be ensured.
Data Quality Management
Group-wide standards for data quality must cover the entire data lifecycle, supported by controls for identification and processes to create transparency for the handling of data quality issues.
Timely Risk Reporting
Risk reporting frequency should be harmonized with the volatility of risk KPIs, but must not exceed 20 working days.
Implementation Challenges
Banks must develop an ambitious, realistic implementation roadmap, supported by diligent project management.
Despite recent regulatory guidance, banks still struggle to meet BCBS 239 requirements. The ECB communicated to enforce stricter penalties for non-compliance to the regulation, including capital add-ons or supervisory actions.
BearingPoint supports banks in addressing BCBS 239 challenges, offering tailored solutions through a combination of technical and regulatory expertise. Find detailed explanations in our white paper, available for download.
