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10th Edition of Business Architecture for Risk and Finance Data Conference

Scaling up the principles of BCBS 239 to facilitate regulatory and customer-driven transformation

September 06-08, 2021 - London, UK
Attend Online or In Person

Addressing the Challenges of BCBS 239: An Interview with Stuart Smith, VP - Global Head of Professional Services at GoldenSource

After several years of providing assistance to financial institutions in implementing the BCBS 239 principles on their businesses, Stuart Smith, VP - Global Head of Professional Services at Golden Source shares with us his views stemming from his invaluable experience, on the current and future state of BCBS 239. Stuart will also be presenting a case study on BCBS 239 on the first day of the 10th Edition of Business Architecture for Risk and Finance Data Conference, 6th -8th of September in London, UK. Request the agenda by clicking on the button below, and enjoy the interview!

1. In 2018, the European Central Bank had reported a disappointing rate of BCBS 239 implementation rate even for global systemically important banks due to lack of clarity regarding accountability and responsibility for data quality, thus providing a pessimistic view for the successful implementation of BCBS 239 principles in the future. Three years later, how accurate do you believe the ECB has been in its prediction?

The ECB assessment of BCBS 239 implementation reflects what we see across the industry. Many banks addressed the principles within multiple parts of their business, but not in a way that could be rolled up to a group level or even a country level.

A challenge for banks when implementing principle-based regulations is that different business lines tend to apply their interpretation to fit their existing methods and capabilities best. Each business line then confirms that it has completed the necessary work, but nuances in their interpretation prevent aggregation across business lines. For example, different product taxonomies across countries can impact global P&L by product line; lack of standard client identifiers across lines of business and regions affect exposure management and risk models.

For BCBS239, there has to be a common approach, some group-wide data standards and practices such that data definitions and data quality are commonly understood and used by everyone. This approach is one of the responsibilities that the Chief Data Office (CDO) team can manage.

2. What are the significant implications on the banking industry from BCBS 239, and can it be turned into an opportunity?

If most bankers are honest with themselves, another Lehman-type experience would result in much the same manual scramble to identify group-wide exposure and the net risk mitigation in place. It would cause similar disruption to business, operations, and IT teams, similar confusion while reconciling numerous data sources and reports to arrive at a commonly agreed-upon version of the truth, and similar delays in taking action to limit potential financial losses.

Although such events are uncommon, the Lehman collapse highlighted that the complexity of financial instruments and global banking relationships had outstripped the capabilities for oversight, insight, and reporting at most major banks. With this being a systemic risk, BCBS 239 requires that risk data aggregation and reporting become a solid competency. There’s a significant effort and cost associated with achieving this, so the onus is on the CDO and each business line to profitably implement and apply this new competence.

Being BCBS  239 compliant improves the efficiency of banking operations and offers insights for doing more profitable business. If a high percentage of your data satisfies group-wide quality standards, there will be fewer trade breaks, faster reconciliation, smoother compliance, and regulatory reporting. If you can quickly see exposure and prevent over-allocation across customers and counterparties, industries, and countries at all levels of your business, you can mitigate risk more effectively. If your risk data is available at a granular level, you can perform better analysis and modeling. Not only does this make your risk insights and reporting more accurate and meaningful, but it also means you can optimize the capital efficiency of your products, take advantage of business trends sooner and react to risk events faster.

3. One thing that describes this data-driven world is how fast everything changes, not to mention the ever-increasing pervasiveness of technology. As BCBS 239 was introduced in 2016, do you believe the principles should be revisited and revised?

Let’s keep the principles in place for another five years before they’re reviewed. They’re difficult to achieve, so changing them would be counterproductive when institutions have barely met them and not yet got the full benefit from them. There is a growing number of practitioners who are true experts at BCBS239 in one or more data domains, such as reference data, market data, product or entity/party/customer data. As people move around the industry or join consultancies, that expertise is growing and spreading. And as institutions learn to apply artificial intelligence and machine learning technology to some of these data challenges, complying with BCBS 239 is becoming more efficient. Let’s get the benefit of this growing competence and confidence with BCBS239 before forcing people to re-learn and replace what has been achieved.

4. During the last year, the pandemic affected everything positively (accelerated) or negatively (put on a halt). What about BCBS 239?

Several banks had to quickly address the lack of secure accessibility of data for remote workers. Because BCBS 239 is often referred to in data projects, e.g., ‘achieve this in compliance with the BCBS 239 principles’, there may have been some progress towards BCBS 239, albeit fragmented. However, in the first few months after lockdown, extreme market volatility demanded the full attention of most business and operations teams, so many ongoing BSBC 239-related projects stalled due to a lack of experienced team members to work on them. Since Q2 2020, established programs aimed at satisfying regulators and improving oversight continued apace, particularly across market/time-series, product, and customer data. It feels as if regulators are unwilling to give more extended concessions on banks being able to demonstrate that the BCBS 239 principles form part of the daily activities at the bank.

5. Finally, what for you are the benefits of attending a conference like the 10th Edition of Business Architecture for Risk and Finance Data, and what can attendees expect to learn from your session?

The benefit of coming together for such a conference is sharing and learning. We’re all banking professionals, and we have challenging demands to meet, challenging programs and projects to deliver, stringent standards to attain, stretching business targets to hit. We’re rightly proud of what we achieve and humble enough to know that other people are doing things better in some areas. To move the industry forward, keep it competitive, and make more of a personal contribution to our firms, it makes sense to engage with our peers. Being face to face again will also be hugely beneficial – fewer distractions and temptations to multitask (as people often do during online calls), and the chance to have casual coffee break conversations with our peers will be refreshing

During my session, I’ll be drawing on the experiences we’ve had at GoldenSource, working on projects to get banks to the point of compliance in several data domains. Sharing these experiences will hopefully give practical guidance to teams that are still on the journey.

BCBS 239 – An Incomplete Compliance Project 

• Banking on Data – BCBS 239 drivers, objectives and approaches 
• Principle Challenges – the pitfalls of principles-based projects 
• Complete Compliance – case studies of two large banks 

For registration pricing and attendance discounts, please contact:

Mr. Ayis Panayi

Digital Media & PR Executive
ayisp@marcusevanscy.com

Stuart will be presenting during the first day of the conference!