ECB calls for integration in risk data aggregation and reporting

Posted on March 29, 2024 by Editor

A recent blog by Elizabeth McCaul, Member of the Supervisory Board of the European Central Bank (ECB), highlighted the ECB’s focus on enhancing supervisory effectiveness in risk data aggregation and reporting (RDARR).

With many banks falling behind when it comes to addressing their weaknesses in this area, the ECB aims to fast track improvements with a spotlight on integrated risk reporting processes. This means expanding the requirements for high quality internal risk reporting that integrates across the entire organisation, including (and importantly) those processes that lead to the provision of high quality digital, XBRL-based, regulatory risk reporting to supervisors.

It’s essential for internal risk management systems to quickly identify and flag risks – such as over exposure to a specific financial instrument. The ECB emphasise the importance of banks’ ensuring these processes are in high-quality working order. The ECB is emphasising the fact that it will continue to rigorously enforce its requirements in this field. And they underline that essentially, the same processes that inform a bank internally of their risk exposures need to be integrated with regulatory risk reporting processes.

Integrating internal and supervisory risk aggregation and reporting helps ensure supervisors have access to high quality data, and that banks themselves can use high-quality data to take sound decisions. Supervisors can also take action where they see deficiencies in the data gathering and reporting process – with proposed steps including  issuing recommendations, requiring regular progress reports, and, if necessary, imposing specific requirements and sanctions.

The ECB’s proactive approach underscores the significance of robust risk data management for sound decision-making in banking operations. The ECB plans to publish a guide on effective RDARR and further refine its supervisory tools to encourage banks to strengthen their capabilities in this critical area.

For more insights, read the blog here.

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