Firms slow to react to BCBS 239

 

There is no doubt that the industry has been slow in its reaction to BCBS 239. In his recent interview with Bloomberg Brief, John Barclay (Market and Credit Risk specialist, GFT) was keen to explore some of the reasons behind this. Additionally, he took the opportunity to outline a few of the key opportunities and challenges facing firms impacted by the Basel III principles.

‘Generally, firms have been very slow in addressing the challenges posed by BCBS 239,’ noted Barclay.‘This is partly attributable to the fact that until very recently firms have tended to concentrate their regulatory compliance efforts on meeting the more imminent mandates imposed by Dodd-Frank and the European Market Infrastructure Regulation, in particular those surrounding trade reporting. Now that these have / are beginning to come into force, firms are looking ahead to the regulatory horizon and have finally begun to realize the full scale of the reforms imposed by BCBS 239.’

Barclay notes that BCBS 239 is different to other regulatory initiatives in that its primary aim is not to force a few minor tweaks in the processes and systems of firms, but to instigate a revolutionary change in the industry’s attitude towards risk. BCBS 239 will impact every element of the day to day operations of financial institutions, and will fundamentally alter the way in which firms view and manage their risk exposures.
He emphasises that:

‘It should be viewed as an opportunity to implement genuine enterprise wide change. The commercial benefits of gaining a holistic and aggregated view of enterprise risk data are huge, as not only will it enable firms to identify any areas of current and potential future risk, but it will also enable them to identify areas for potential revenue improvements and operational efficiency gains. Institutions that simply approach BCBS 239 as a “box ticking” exercise, will certainly find themselves to be less efficient, and in all likelihood less profitable, than those who choose to fully embrace this opportunity for strategic change. As with all regulations, there is a bare minimum that firms will need to do in order to comply and avoid incurring regulatory penalties, including increased capital charges.’