Description:
This agreement, forged by members of the Basel Committee on Banking Supervision (BCBS) in Basel, Switzerland, is designed to achieve a closer match between the capital that banks hold and the risks they take. It's only required for the largest banks, but it will touch some aspect of data management at many financial institutions.
Basel II is designed to lead to more stable, efficiently run institutions with more transparency for investors. Some banks may be able to sharply decrease the amount of capital they hold if they can prove they're managing risk appropriately. The "Three Pillars" of Basel II are:
• Minimum capital requirements (based on credit risk, operational risk, and market risk)
• Supervisory reviews to provide monitoring and self-assessment of an institution's capital adequacy and internal processes
• Market discipline, which includes disclosures of capital, risk exposures, rating models, and the systems and processes used to determine capital adequacy.
Compliance requires both initial and ongoing data-related effort and expense. This includes:
• Clear and consistent definitions for all data elements used in risk management decision-making (including customer master data)
• Compliant data warehouses that can manage risk data
• Documentation of data collection, standardization and cleansing, data calculations, and data transformations as information works its way through transactional systems, warehouses, and business intelligence applications
• Proof of Advanced Data Management processes.
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