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The need for data management platform to comply with Basel III

Nurdianah Md Nur | Aug. 14, 2014
By having such a platform, banks in Asia can be assured that their regulatory reports will consistently meet the evolving needs of regulators, said James Stewart of Wolters Kluwer Financial Services.

Banks in the Asia Pacific region should start implementing systems that enable them to always have the right information at hand if they have not done so, urged James Stewart, general manager for APAC compliance division at Wolters Kluwer Financial Services, in an exclusive interview.  He reasoned that doing so will enable them to comply with Basel III, which is set to be in full effect globally by 2019.

Under Basel III, banks will be required to frequently prepare working versions of regulatory submissions — consisting a wider range of information than before such as balance sheet and risk view — to ensure that they continue to operate within their prudential limits. This may cause added pressure for banks to reconcile requirements needed to ensure alignment between finance and risk reports for both internal use and regulators. To reduce that pressure, banks should utilise a data management platform that is catered for regulatory reporting, advised Stewart.

An example of such platform is Wolters Kluwer Financial Service's Summix platform. Manned by the company's experts that monitor and analyse regulatory changes in 50 countries worldwide, Summix features a regulatory update service which allows banks to be assured that they are meeting the ever changing regulatory requirements. The platform also offers an online analytical processing (OLAP) feature and dashboard that present information in a graphical and tabular format to provide banks with an instant view of their firms' financial reporting status. Besides that, Summix is able to deliver information in extensive business reporting language (XBRL) as required by most regulators in the region, said Stewart.

Understanding Basel III
Developed by the Basel Committee, Basel III is a global regulatory standard on bank capital adequacy, stress testing and market liquidity risk. It is designed to improve the banking sector's ability to absorb shocks arising from financial and economic stress, improve risk management and governance, as well as strengthen banks' transparency and disclosures. 

Under Basel III, banks are required to have 100 percent liquidity coverage ratio (LCR) by 2019, said Stewart. This means that  banks are always required to hold an amount of highly-liquid assets, such as cash or Treasury bonds, equal to or greater than their net cash over a 30-day period. The aim of doing so is to ensure that banks "do not overstretch themselves" in terms of lending so that they are able to ride out short-term economic or financial disruptions, he added.   

Initially, there were concerns that imposing a 100 percent LCR rule might "stall economic recovery." This is because economic recovery is dependent on bank lending but under the ruling, banks that are not at 100 percent LCR are not allowed to use their high quality liquid assets for lending, explained Stewart. However, regulators in Asia believe that the banks in the region are now adequately capitalised and thus ready to adopt LCR. "Even if they don't have enough liquidity, regulators are prepared to accept things like committed facilities with the government or with the reserve banks to get to 100 percent LCR," he said.

 

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