ESBG outlines vision on enhanced risk data practices as part of ECB consultation

On 6 October, ESBG submitted its response to European Central Bank consultation on enhancing Risk Data Aggregation and Risk Reporting (RDARR). In its response, ESBG highlights key areas that require attention to enhance the effectiveness of risk data practices within the financial industry.

First of all, ESBG acknowledges the six supervisory expectations identified as priority areas by the ECB. While it finds them appropriate, ESBG advocates for providing more granular details on these priority areas. This additional clarity is essential for better implementation results, ultimately fostering transparency and accountability.

In the realm of management body responsibilities, ESBG emphasizes the need for a clear differentiation between accountability and responsibility. While accountability should lie with Board members, responsibilities should be delegated top-down. We also stress the importance of sharing best practices in greater depth to facilitate effective implementation.

ESBG suggests that the concept of roles should be individualized and take the unique business models of financial institutions into account. Specific responsibilities of the Data Governance unit should align more closely with the needs of banks, and details for validation units need further specification. We believe that these clarifications will contribute to better implementation results.

ESBG recognizes the importance of materiality in incorporating subsidiaries into the governance framework. To further enhance this process, we propose expanding the criteria to include relevant reports. This expansion will allow for better prioritization and distinction based on materiality and impact, providing a structured framework for focus on critical templates.

ESBG believes that expectations regarding the production time of reports require further description. Timeliness in internal risk reporting is crucial, and providing more details on expectations will enable banks to improve their capabilities in this regard.

Additionally, we emphasize the need for more discussion possibilities between ECB and the industry to share views and exchange insights, enhancing the quality of the implementation process.

Overall, ESBG’s recommendations are aimed at ensuring that the financial industry can implement these practices effectively, aligning with international standards and best practices.