Financial Services Solutions: Basel Accord
Financial Services: Basel II - Risk
The financial services industry is undergoing dramatic changes – in part driven by the market since 2008, and significantly by worldwide implementation of the Basel II banking Accord. Basel II is the second of the three broad Basel Accords formulated by the world’s leading banks & regulators; the purpose of Basel II Accord is to create international standards in regulations for banks’ capital requirements to ensure institutions’ survivability amongst the financial and operational risks of the banking industry.
The banking business is unlike any other businesses – profitability is achieved only by undertaking significant risk. If there is no risk in transactions, there is little to no profit; the greater the risk, the greater the expected reward. But alas sometimes the “expected reward” does not materialize and the transaction is a loser; in this case the losses are covered by reserves. The critical balance point in banking is to undertake just the right amount of risk and have on hand just the right amount of reserves. The key to Basel II success is measurement of capital (easy to do) and risk (hard to do) for that balance.
The Diginome Financial Services: Basel II - Risk solution has been developed with the goal of enabling the industry to much better identify and measure risk plus the sources and root causes of risk. Key to risk is “data integrity”. Diginome’s solution ensures data integrity.
Data integrity is the assurance that data is consistent and correct. Data integrity means that data is “whole” or complete. Data integrity is what gives bankers and regulators the assurance that information conveyed in data is trustworthy, true, and correct; it has integrity. Data integrity is the founding requirement in all measures of financial services risk.
Key Features of Diginome’s Financial Services: Basel II - Risk Solution
By monitoring all data sources, transformations, and data uses the Diginome DataDNA technology in the Diginome Financial Services: Basel II - Risk Solution creates a data view at the atomic level of ALL data – not just values, but includes context and transactional information. This atomic level access to ALL data information yields key benefits ensuring data integrity by:
1. Unified view of all data sources and their integrity related to risk and compliance
2. Heredity of all transactions
3. Data transformation from a crawl back process and in real time
4. Rules for pattern recognition and learning
5. Identification of suspect data elements – with heredity tracing upstream to origin for root causes as well as downstream for consequences
6. Enable “deep-dives” for certification processes and all compliance reporting
In addition to delivering true data integrity for risk and capital matching, the Diginome solution best satisfies the “second pillar” of the Basel II requirements: supervisory review.
With Diginome DataDNA solution, bankers will be able to demonstrate the requirement of enhancing the processes for the measurement and management of credit risk in the loan portfolio related to the use of advanced approaches for calculating risk-based capital requirements and accuracy. And in regulatory reviews, the institution will be able to demonstrate the processes that have been implemented for assess risk parameters and advanced systems, and supervisory assessments of their accuracy and reliability.
The top and bottom line benefits to the financial institution using the Diginome DataDNA: Basel II – Risk Solution may include:
• A reduction in loan loss reserves by less need for big “safety factors”
• An increase in revenue by the deployed un-needed loan loss reserves
• A reduction in the number of days to compliance certification
• A reduction in resources needed for compliance and certification
Additional Information
Diginome’s Data Engine and Rules Engine both capture and categorize all characteristics of data values. The Rules Engine allows the financial services institution the capability to identify specific characteristics for tracking key elements of risk. Its User Interface engine enables completely flexible insight for executives, managers, auditors, and regulators into the workings of the banking system on a real time basis. Since the UI is highly flexible it is readily customizable to meet any needs.
The Diginome DataDNA solution uses existing or custom API connectors to register and track the characteristics of all data values in any application from the time of creation to the end of life. Diginome DataDNA solves all problems related to maintaining data integrity across multiple platforms and clusters. It is the ideal solution to industries dependent upon high volume, high value, high integrity data.
