Risk Data Aggregation and Risk Reporting: A Regulatory Perspective

Giancarlo Pellizzari and Paolo Poloni

Compliance with the Basel Committee on Banking Supervision (BCBS) principles for effective risk data aggregation and risk reporting (n. 239) has been one of the top priorities of the European Central Bank (ECB) Banking Supervision in 2016 and 2017. Indeed, the ECB Banking Supervision acknowledges that “high data quality is an essential precondition for accurate risk information and, hence, sound risk management and control and ultimately adequate capital requirements”.11See ECB Banking Supervision priorities for 2017: www.bankingsupervision.europa.eu/ecb/pub/pdf/publication_supervisory_priorities_2017.en.pdf. The need for banks to exercise prudent risk management is particularly relevant in the existing low interest rates and low profitability environment, in which banks search for high-yield opportunities. However, experience has shown that some banks’ management boards took business and risk management decisions on the basis of incomplete or inaccurate risk information. It is therefore important for the ECB Banking Supervision to formulate clear supervisory expectations vis-à-vis banks, as data quality, risk aggregation and reporting capabilities are an essential precondition for

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