Banks failing to meet reporting standards

National regulators have expressed renewed concern over the inability of large banks to consistently produce high-quality data.

About a third of the 19 banks surveyed by the Senior Supervisors Group (SSG) had failed to produce weekly trading reports that met regulatory standards in 2012.

The SSG is made up of banking regulators from the US, France, Germany, UK, Canada, Italy, Spain and Switzerland. It sets standards for 19 participating banks including Credit Suisse, Deutsche Bank, JPMorgan, UBS, HSBC and the Royal Bank of Canada for the timely and accurate reporting of counterparty risk exposures.

“Five years after the financial crisis, firms’ progress toward consistent, timely, and accurate reporting of top counterparty exposures fails to meet both supervisory expectations and industry self-identified best practices,” said Sarah Dahlgren, chair of the SSG.

Data quality deteriorating

In 2012, five European banks could not submit the report with a T+3 lag. Two European banks did not submit the report weekly, but rather biweekly and monthly, respectively, at substantial lags, the report said. That year, 85 per cent of firms had 80 per cent or more automated data feeds, compared with 68 per cent in 2011 and 56 per cent in 2010.

With respect to updating critical metrics per benchmark frequencies, only nine firms were able to do so on a sufficiently frequent basis in 2012.

In the area of gathering the types of risk exposure data, all 19 firms self-reported that their submissions captured at least 95 percent of exposures to counterparties globally and by business line in 2012. But the overall quality of data actually went backwards.

“Recurring data errors indicate that many firms are below SSG benchmark standards for data quality and cannot measure and monitor the accuracy of the data they submit or rectify quality issues in a timely manner," the report said.

Australian banks doing well

Providing an Australian perspective, Paul Franks, financial services director for SAS, observed that the big domestic banks are meeting their obligations and expectations with regard to data.

“The banks are enhancing their core operating systems, so what’s happening is that they are getting access to more granular data which they can use to support their regulatory capital and risk management obligations and activities,” he said.

But the regulatory bar is moving ever higher. SAS has found that data management practices “continue to evolve” and with that evolution, “there is genuine opportunity for banks to enhance their risk management systems, particularly for data management”, said Franks.

“I think it’s fair to say that each of the major Australian banks are seeking to expand their data governance and data management capabilities to meet new regulatory obligations, primarily Basel III,” he said.

Dahlgren said that going forward, regulators will expect firms to continue to devote time and attention to the infrastructure necessary to aggregate and update exposures accurately and in a timely manner.

Senior Supervisors Group, SSG, European Banks, SAS, Credit Suisse, Deutsche Bank, JPMorgan, UBS, HSBC, the Royal Bank of Canada
Vish Teckchandani,
Article Posted:
January 21, 2014

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