From Basel to 'Business As Usual'

Sibos Issue 1, 2015 Issue Issues The official daily newspaper of Sibos 2015 Singapore I 12-15 October The return of Asia: following in Solutions emerge relationship banking giants’ footsteps to collateral troubles page 6 page 10 page 14 From Basel to REGULATION No end in ‘business as usual’ sight As business models evolve and costs As Sibos 2015 in Singapore continue to rise approaches, turn to the under the shadow centre spread of this edition of Sibos Issues for of Basel III, the all the information you need for flexibility need to book your place is increasing and plan your trip. After the appeal of all, October is closer than outsourcing. you think! Look beyond the “I see no reason to pull the Best wishes brake on regulatory reforms,” requirements said Basel Committee chair- Sven Bossu, man Stefan Ingves in a speech head of Sibos and think in Chicago last November. “We must not lose sight of the long- about how term benefits of limiting the costs to society that financial they can crises cause.” help you do Such rhetoric is perhaps in- IN BRIEF tended to remind banks that the business. commitment to regulatory re- form remains as strong today as Market Infrastructures Marion Leslie it ever has been; changes are un- managing director avoidable. With the Basel III pack- Bridging the gap to real-time pricing and reference payments age of capital and liquidity rules services, now well into the implementation page 7 Thomson Reuters phase, other major reforms are still looming, at both domestic Get ready for Sibos and international levels. Helping you prepare for The challenge for banks is to this year’s main event assess the cumulative impact page 8 of multiple sets of regulation that affect different regions and markets, and to make changes Corporates to their business models accord- Sending out a global ingly. But making that assess- message ment on anything more than a page 12 short-term basis is difficult. “There is still so much regula- New reporting requirements are forcing banks to tion to be implemented, and so Standards little understanding of how all Community challenge take a more holistic view of data management. of the reforms fit together, that page 13 no one can really foresee what banks will actually look like in Overhaul needed to help banks provide aggregated five years’ time,” says Kevin Nix- Innotribe on, risk and regulatory leader at Opening the door to risk data to regulators. Deloitte in Sydney and former glittering prizes managing director of regulatory page 15 affairs at the Institute of Inter- On 11 March, around 30 major Comprehensive Capital Analysis kets. Earlier in March, the Basel national Finance. banks let out a collective sigh of and Review (CCAR) conducted Committee announced that all relief. The Federal Reserve had by the US central bank is just 224 large internationally active Moving the goalposts released the results of its lat- one of several reporting hoops banks currently meet Basel III’s est stress tests, confirming that through which international risk-based capital minimum re- That lack of clarity has its roots most had passed, albeit some by banks must jump to maintain quirements, based on data as of in what could be described as the skin of their teeth. But the their presence in major mar- continued on page 2 continued on page 4 Sibos, powered by SWIFT. www.sibos.com www.swift.com TECHNOLOGY From Basel to ‘business as usual’ continued from page 1 June 2014. This is a positive indi- exposures across risk types and cator of the financial stability of be able to drill down,” he says. Banks must the global banking system, but it Historically, banks have taken respond more is part of an ongoing semi-annu- a bottom-up approach to report- al review process which identi- ing to derive an aggregated view quickly to fied a €2 billion capital shortfall of risk, presented as a standard among 126 ‘Group 2’ banks, and set of metrics to senior manage- requests from noted that only 80% of such ment. This involves a degree of banks have so far achieved the reconciliation, checking and con- regulators for 100% liquidity coverage ratio firmation, and then potential ad- target they are required to meet justment at an overall level, ex- different types by 2019. plains Hall. “This approach does With the European Banking not lend itself to ad hoc queries of stress test. Authority conducting similar from managers or regulators for Steven Hall, director, UK head of tests for European banks – and a slightly different cut of the data banking risk and Basel III, KPMG central banks and prudential or drilling down for further detail. regulatory authorities across Increasingly, banks must respond the world examining banks in more quickly to requests from their jurisdictions – the message regulators for different types of is clear: regular and increasingly stress test, for example, so that rigorous reporting requirements they can provide the requisite are here to stay. This is placing reporting at that disaggregated strains on the data manage- level,” he explains. ment infrastructures of international banks that they were not Resource-intensive issues,” he wrote. Today, O’Con- The challenge, it seems, is to to become embedded across dif- designed to withstand. Banks reporting nell is no less concerned. create a data governance and ferent functions, including the have been throwing bodies at “I’d love to say best practice management structure that can front office. the problem, but experts believe David O’Connell, senior analyst is beginning to emerge, but regularly and rapidly churn out Aite’s O’Connell agrees, not- a more structured approach is for wholesale banking at Aite I’m just not seeing it,” he says. holistic and granular reports ing that “business requirements well overdue. Group, a consulting firm, flagged “Banks are discovering holes from across disparate business for applications used at the edg- According to Steven Hall, di- his concerns in a blog in March in the data that prevent them lines and data sets in a more au- es of the organisation need to rector, UK head of banking risk 2014 in response to the Federal from reporting risks accurately, tomated, resource-efficient fash- be broadened to encompass the and Basel III, KPMG, policy-mak- Reserve’s first round of CCAR or they are finding data sets to ion than banks are using today. data requirements at the cen- ers want banks to be in a position tests, which raised objections be unstable. Overall, the effect It’s a big ask, but there are a num- tre” and that banks continue to to provide good-quality data at to four banks’ submissions. “Al- of complying with stress tests is ber of paths forward. The core be dissatisfied with their invest- both an aggregated and disag- though the Fed used the term taking vital resources away from task of establishing and main- ments in data warehousing. A gregated level. “Banks must be ‘qualitative’ nebulously to de- the core business.” taining a robust data architecture greater responsibility for data able to aggregate risks within scribe its objections, I’d bet the Banks’ efforts to monitor that can deliver aggregated risk quality in the front office is at and across business units within farm that data management and and report their risks are com- data requires both clear leader- the heart of a new concept – the the group, aggregate risks and risk analysis were two primary plicated by a number of recent ship and wide stakeholder buy-in, ‘digital back office’ – developed trends, such as the wider range suggests Marion Leslie, manag- by Gavin Slater, co-founder of of activities and transactions ing director pricing and reference technology solutions provider of for which they must collate and services, Thomson Reuters. Stream Financial, in response to retrieve data, a rapid expan- “The chief data officer doesn’t the reporting and controls chal- sion in the volume and veloci- necessarily manage all the data lenges faced by banking clients ty of static data they produce assets, but has responsibility for in the post-crisis era. and consume, and the broader knowing what they are and who In short, Slater argues that variety of communication and owns them and the life cycle of the traditional operating mod- data types they use in the price the content, as well as under- el, whereby data is sent from or decision discovery phase. standing the data needs for re- the front to the back office for “Voice and chat room interac- porting, etc.,” she says. centralisation, compliance and tions are being recorded and a control purposes, meets neither variety of contextual data inter- Sharing responsibility the needs of internal clients or actions must be retained. Banks external regulators, without need to consider how best to Leslie argues that business units costly manual workarounds. In store and manage a disparate and central functions can work particular, the process of data range of data sets, and analyse together more closely to ensure adjustment and aggregation un- them, increasingly in real time,” data management requirements der the prevailing model weak- says Michael Cooper, chief tech- become an integral part of the ens the effectiveness of control nology officer, BT Global Bank- IT strategy, while responsibili- monitoring and the accuracy ing & Financial Markets. ties for data management need and timeliness of reporting. In Banks need to consider how best to store and manage a disparate range of data sets, and analyse them, increasingly in real time. Michael Cooper, chief technology officer, BT Global Banking & Financial Markets Publisher: Sven Bossu, SWIFT Managing editor: Alan Rowan, SWIFT Sibos Issues is written and produced by Asset International on behalf of SWIFT Advertising contact: Stephanie Gerniers, SWIFT; [email protected]; +32 2 655 4734 Printed by Innovative Print Solutions Pte Ltd Legal notice: SWIFT © 2015 Reproduction is authorised with acknowledgement of source.

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