BCBS239: Great challenge, great opportunity

In the following article published on Finextra, John Barclay – a specialist in Market and Credit Risk – takes a look at BCBS239 compliance. The reforms, which are highly unprecedented, will bring about the greatest change in risk management practices in banking history. How are firms to deal with the extensive regulation and successfully implement these reforms? An enormous challenge – but also a great opportunity.

John Barclay GFTIt is all too easy to be overwhelmed by the extensive nature of BCBS239 – its impact will certainly be felt right across the enterprise, and there is still much to be done to meet the deadline of January 2016. As firms attempt to ‘tame the beast’ that is BCBS239, they must remain calm, stick to the plan, and take measured steps without losing sight of the bigger picture and purpose of the regulation.

In approaching BCBS239, both the banks and the regulators are incompletely uncharted territory. Such monumental overhaul of banks’ risk management practices has never before been attempted, and it is extremely important that those who are facing the challenge do not forget this. All compliance programmes are replete with unknowns and risks, but firms should not allow themselves to become overwhelmed by the scale of the work needed in order to become fully compliant with the 14 principles of BCBS239.

Most firms are already well into their respective BCBS239 programmes. For practical reasons many of these firms have had to make various compromises or undertake work-arounds. It is important, therefore, that firms remain cognisant of the technical debt associated with these work-arounds and compromises and that they have a plan with secured budget to address them. Technical debt left unresolved can cause crippling costs and loss of productivity in the future.

Colossal opportunity

Although the challenges posed by BCBS239 are significant, firms should not lose sight of the fact that the regulation provides a colossal opportunity to implement meaningful strategic change at the group level. Unlike other regulations, BCBS239 isnotprescriptive and does not demand exact amounts of capital or information from those affected.
It simply demands that those firms which are affected meet the principles in a way that they deem to be appropriate. This lack of prescription has made it difficult for some firms to mobilise around the regulation and has created the temptation to restrict the scope of compliance efforts to the bare minimum. However, firms that adopt a minimalist approach to meeting the principles will gain little overarching benefit from the exercise.

One way in which firms are extracting maximum business value from their BCBS239 compliance initiatives is to leverage user centric design methods to create intuitive, interactive and real-time data dashboards. By enabling business managers to access, manipulate and drill down into real-time data, organisations can now achieve vast efficiency improvements in the production, distribution and utilisation of their data. This in turn has enabled some significant cost savings.

Furthermore, the availability of easily digestible and customisable data enables managers to easily identify existing or potential risks, and to quickly investigate and capitalise on opportunities for efficiency improvements resulting in additional profit.
BCBS239 will bring about the greatest change in risk management practices in banking history. The scale and nature of the reforms are unprecedented, and banks and regulators alike are breaking new ground in order to successfully implement the reforms.

By keeping calm, and carrying on with their planned programmes of work, banks have the opportunity to seize the enormous opportunity of a truly integrated and efficient future state brought about and encouraged by BCBS239 compliance.

Firms should not fear this change, they should embrace it.


This blog is an extract from the point of view ‘BCBS239: A behemoth is born‘. To receive the full article as a pdf, simply enter your email address in the box at the top of this page

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