ECB Annual Report on supervisory activities

Based on the assessment methodology, the thematic review was launched in
coordination with an EBA survey 14 for more than 100 significant institutions in
December 2016, with the JSTs evaluating the level of preparedness of banks and
their implementation practices. This evaluation is to be followed by a horizontal
analysis which, taking into account the results of the above-mentioned EBA survey,
will benchmark banks against their peers. The results of the thematic review are
expected to contribute to a proper and consistent implementation of IFRS 9 and its
provisioning policies by 1 January 2018, the effective date of IFRS 9.
Risk data aggregation and risk reporting
Sound risk management rests on firm-wide data quality, effective risk data
aggregation and internal reporting practices. However, a key lesson from the
financial crisis was that certain banks were unable to fully identify risk exposures.
The reasons were a lack of adequate risk information together with weak risk data
aggregation practices. The affected banks’ ability to take timely decisions was
seriously damaged, with wide-ranging consequences for the banks themselves and
the financial sector as a whole.
Against this backdrop, the thematic review on risk data aggregation and risk
reporting was among the 2016 supervisory priorities. Its objective was to assess the
effectiveness of risk data aggregation and risk reporting practices as well as related
IT infrastructure. This assessment is mainly guided by the BCBS 239 Principles for
effective risk data aggregation and risk reporting.
In early 2016 <strong>ECB</strong> Banking Supervision launched the thematic review on effective
risk data aggregation and risk reporting for a subset of banks under its direct
supervision. The sample included two groups of banks. First, those banks which
were involved in the BCBS 239 self-assessment performed by the Basel Committee
in 2013 and 2014 – this group was largely identical with the group of banks classified
as global systemically important banks at the time. Second, a further set of banks
was included in the sample in order to broaden it.
The thematic review is being performed by JSTs with the support of a centralised
working group, comprising members of the <strong>ECB</strong> and NCAs. The latter provide
operational guidance and ensure consistent application. The work is carried out in
line with the principle of proportionality and was divided into two main phases in
2016. During Phase 1 appropriate operational guidelines for analysing and
assessing the compliance status were developed, with a focus on risk type (credit
risk, liquidity risk, counterparty credit risk, operational risk, interest rate risk in the
banking book – IRRBB – and market risk). Phase 2 comprised a deep-dive analysis
of the liquidity risk and credit risk dimensions. First, banks in scope were asked to
provide a specific set of liquidity and credit risk data in a compressed period of time
(fire drill exercise). Second, the same banks were requested to show their data
14
Second impact assessment of IFRS 9 on EU banks.
<strong>ECB</strong> <strong>Annual</strong> <strong>Report</strong> on supervisory activities 2016 − Supervisory contribution to financial
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