In an effort to improve banks’ ability to make informed risk management decisions, global banking regulators unveiled a set of principles for effective risk data aggregation and risk reporting Tuesday.
The Basel Committee on Banking Supervision has issued for consultation principles that are intended to strengthen banks’ risk data aggregation capabilities and risk reporting practices. It notes that, during the financial crisis, many banks, including global systemically important banks, were unable to aggregate risk exposures fully and quickly. And, as a result, their ability to take risk decisions in a timely fashion was seriously impaired; which, in turn, had significant consequences for individual banks and the stability of the financial system as a whole.
The committee says that implementing the principles will strengthen risk management at banks, particularly systemically important banks, thereby enhancing their ability to cope with stresses.
“These proposals are a significant step towards improving banks’ risk management capabilities and they will also help to ensure that [systemically-important banks] are resolvable, hence reducing the potential recourse to taxpayers,” said Stefan Ingves, chairman of the Basel Committee and governor of Sweden’s central bank.
Systemically-important banks are required to implement the principles in full by the beginning of 2016, and the Basel Committee indicates that it believes the principles can be applied to a wider range of banks too. Comments on the proposals are due September 28.