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A Tsunami on the RDARR: BCBS 239’s Impact on the Big Data Lake

By on October 29, 2015

** In a previous post, we discussed the impact of financial services compliance on big data architectures. There may be no better example than BCBS 239.**

A tremor was felt far offshore in January 2013 when the Basel Committee on Banking Supervision issued BCBS 239. BCBS 239 mandated that banks adhere to a comprehensive set of core principles for effective Risk Data Aggregation and Risk Reporting (RDARR) practices as early as the start of 2016.

As a result, business consultants, systems integrators, and big data vendors at all levels of the stack (including Datameer), are actively helping banks prepare their processes and IT infrastructures for compliance. While the waves of BCBS 239 will make landfall at different times – depending on the classification of your bank – the question is, will you be ready? Whether you’re on target for compliance, know that you’re not ready, or have not yet been identified for compliance, banks have shared that their biggest challenge is their IT and data infrastructures, and time is not on their side.

Reported Challenges in Preparing for BCBS 239

Self-assessment questionnaire results published as of January 2015 showed that many Global – Systemically Important Banks (G-SIBs) were making progress on key principles – but many were still struggling, with year-over-year progress largely unchanged. While banks showed the greatest progress with principles aligned to risk reporting practice, data aggregation and the supporting infrastructure to enable proper governance remain the most challenging areas.

Basel Committee on Banking Supervision Progress in adopting the principles for effective risk data aggregation and risk reporting Report

Not surprisingly, the principles with the lowest reported compliance were:

  • Principle 2 (Data Architecture/IT infrastructure),
  • Principle 6 (Adaptability), and
  • Principle 3 (Accuracy/Integrity).

However, and perhaps most alarming, the year-over-year downgrades related to compliance for a number of Principles reveals that banks are uncovering their struggles as they progress further down the path. Specifically, banks “continue to point to the need to enhance current IT architecture and data flows to reduce complexity and manual workarounds” and that their “IT infrastructure, while adequate in normal times, was not adequate in stress or crisis situations.” Domestic – Systemically Important Banks (D-SIBs) face these same compliance challenges.

Even those that believe they will be ready for their respective deadline will be doing so with many manual workarounds that are not optimal or appropriately adaptable.

A Big Data Platform to Enable BCBS 239 Compliance

It is critical for financial services institutions to choose a big data solution whose architecture will best enable compliance – and quickly. This solution should allow for comprehensive enterprise-level governance, while also enabling analysts to complete and continually improve their risk analytics in an easy to use self-service paradigm.

Most banks have historically completed these analytics across many disparate teams in many disparate disconnected systems or spreadsheets. A solution that enables the aggregation of data from upstream source systems and empowers the transition of free standing spreadsheets into a central business analyst-friendly interactive repository – all in the creation of a comprehensive data aggregation and reporting pipeline – is crucial.

The ideal solution should include features that give financial services institutions the ability to:

  • Apply enterprise-wide governance to achieve a single source of truth
  • Instantly see the lineage of any data
  • Ensure data quality with automation and access control
  • Achieve Real-time audit readiness

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Jason Demby