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FRM Part I · FRM Exam Part I · Principles for Effective Data Aggregation and Risk Reporting

A bank has acquired a subsidiary whose systems cannot yet feed the group risk data warehouse. Under BCBS 239, what is the most appropriate supervisory expectation regarding this situation?

Senior management should understand the aggregation limitations, tell supervisors about them and follow a remediation plan, because BCBS 239 applies across the whole group. Excluding the subsidiary silently or withholding reports from the board would breach governance expectations. Acquisitions are not required to stop.

  1. ASenior management should understand the limitations, and the bank should disclose them to supervisors and have a plan to remedy them, since the principles apply on a group-wide basisCorrect
  2. BThe subsidiary can be excluded from risk reports indefinitely without disclosure
  3. CRisk reports should be withheld from the board until the integration is complete
  4. DThe bank must stop acquisitions until all data is integrated and then request supervisory approval

Explanation

Governance requires that the board and senior management be aware of limitations in data aggregation that hurt risk reporting. Banks should discuss these with supervisors and work to a remedial plan. Indefinite exclusion without disclosure conflicts with group-wide coverage, and withholding reports from the board makes governance worse.

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