The Basel Committee on Banking Supervision of Switzerland-based Bank for International Settlements (BIS) updated the conditions to the Basel II accord this year to further strengthen banks’ regulatory and capital framework. The amendments include the provision of more capital for exposure to structured investments such as collateralized debt obligations and asset-backed securities that have been blamed as the root cause of the financial crisis. The committee also imposed higher standards for determining the risks of such instruments. It also required banks to disclose their holdings of these instruments to prevent speculation among market players on the strength of banks’ finances in relation to their capital market activities.
Complying with Basel II is fraught with challenges across both business and IT. At the core, compliance depends on having access to timely, trusted, and comprehensive data for risk modeling and regulatory reporting. Banks have made significant investments in infrastructure, data management technologies, people, and process reengineering. Yet many banks still struggle to maintain compliance for a number of reasons.
- Lack of a single view/source of credit and risk data across the enterprise
- Limited access to required data
- Inflexibility of existing IT systems
- Inconsistent reference data
- Inaccurate data
- Limited data lineage capabilities
Reengineering or developing risk management systems to comply with Basel II is a major undertaking for any organization. It requires changes to the risk reporting process, as well as rethinking and streamlining data feeds, inter-system reconciliations, and the location, level, and frequency of manual adjustments. Institutions can improve their compliance positions with data integration and data quality to ensure trusted, consistent, and audit proof data is available to the business. More importantly, allowing business users responsible for their data to participate in the governance process and having the ability to make it available to those who need it regardless of source, format, latency, or location.
Have a look at details for Informatica 9, the next generation of data integration which will be launched next month, helping banks and other financial institutions to meet their compliance challenges and realize the full potential of their data.
