The new regulatory framework:: a liquidity risk example How banks adapt to the regulator

Abstract

This paper concentrates on the development of the new regulatory framework, after the 2007 crisis, using a real case study through which it aims at demonstrating, the feasibility as well as the problems that arise along the way, when trying to comply with the regulator’s requests. Over the last decade, there has been a growing interest in data governance, strongly correlated to both the technological development and the amount of information, drastically spreading and escalating. The Basel Committee on banking supervision followed by the European Commission, have given great importance to the subject matter, however it seems that the market fails to direct the proper attention needed. In this study, we analyze a real-world scenario, of a bank’s effort to develop a proper data governance framework, while attempting to comply with the scope and timeline, defined by the international controlling bodies. The bank being considered, composed by international subsidiaries, defined the perimeter of action and directed much of its efforts and resources, towards the management of data at a multinational level. For this reason, the analysis conducted is organized in sections that gradually present and explain the rationale used by the bank, as well as the regulatory releases and updates made in the last years, highlighting the methods and depicting the procedures adopted by the whole group. The method presented, along with the regulator’s reflections and judgement, demonstrate the feasibility as well as the difficulties encountered, in the effort to create a solid data governance, in a market characterized by increasing amount of information and ongoing structural change. This paper shows that a well-defined strategy, detailed scheme and clear objectives are the key elements for satisfying regulatory requests, in the banking sector. Although data governance is considered a fundamental aspect for the market players today, many institutions seem to disregard its role, setting different priorities even if this leads to penalties. The below case should represent a pilot project, for the market as a demonstration of how this initiative, on one side drives to compliance and on the other side, represents an effective instrument, that uncovers the weaknesses present in the banking sector and aims at supporting banks, into creating an effective process of aggregation and reporting of risk information.