Principle 14:
Home and host cooperation - Supervisors should cooperate with relevant supervisors in other jurisdictions regarding the supervision and review of the Principles, and the implementation of any remedial action if necessary.

The financial crisis underscored the importance of data quality and data latency in the area of risk management. Regulators were quick to react by enacting regulations around data quality in most jurisdictions. For example, US regulators enacted the Comprehensive Capital Analysis and Review (CCAR) monthly and quarterly data reporting and the regulators in Europe enacted changes to the capital requirements directive (CRD) and capital requirements regulation (CRR).  The BCBS 239 principles (see SAS’ series on the Principles of BCBS 239) can provide an overarching framework for many of these regulations from a risk data perspective. However, a key factor for success is appropriate cooperation between home and host regulators.

For example, the Enhanced Prudential Standards (EPS) for foreign banking organizations finalized by the Federal Reserve, requires banks to adhere with regulatory requirements such as CCAR, Basel III and single counterparty risk limits. Each of these areas would require risk-data quality checks; and the US regulators may want to examine the data quality rules followed by other jurisdictions and allow for these to be factored in their analysis.  This would go a long way in reducing the burden on these banks.

The open exchange of supervisory data and practices by various regulatory bodies (as permitted by law) as well as the exchange of information through supervisory colleges would help in establishing a consistent review framework that could help eliminate redundant and uncoordinated reviews related to risk data.

Read this free white paper for a more in depth discussion of BCBS 239 and how SAS can help. And be sure to read the other articles in this series.