Data, Money, and Regulation by Cornelia Levy-Bencheton

Author:Cornelia Levy-Bencheton
Language: eng
Format: epub, mobi, pdf
Publisher: O'Reilly Media, Inc.
Published: 2015-08-19T04:00:00+00:00

Regulators have identified data as a priority, in keeping with trends across industries. In interpreting the previous figure, a key element is the average rating trend line (in purple) for the Basel Principles where scores range from 2.43 to 3.33. What is particularly striking is the lowest score for Principe 2 (P2), or “Data Architecture and IT Infrastructure,” which Basel defines as “data taxonomies, adequate controls through the lifecycle of data and overall assessment and expected date of completion.” P2 was deemed an essential requirement for the completed schedule due in January of 2016 for all banks. Meantime, and remarkably, P2 has the lowest score of all.

Here we have the basic building block of regulatory reporting and stress testing—financial data itself—appearing as the weakest score in the compliance report card. How can the public (or even the regulators) feel confident if data is not accurate, timely, pristine, and complete? Doesn’t this compromise the integrity of these reports? How can they calculate important stress metrics such as expected losses, loss severities, liquidity, net income, and regulatory capital without good data? Not to mention understanding customer data and targeting their needs.

Relationships between regulators, banks, and consumers appear to be a choke point with the juggling of competing and conflicting imperatives in a catch-22. Later in the same survey, the banks were asked to evaluate their readiness to address another crisis. They all provided assurance that they would be able to do so. And their responses were accepted.

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