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Endgame! Basel III rules put banking bosses on edge – IT impact also looms for CTOs

Rules demand "a significant uplift in terms of new data sourcing... IT leadership will need to carefully manage cultural and technical integration between internal risk and compliance teams"

Lobbyists march into battle over the B2E capital requirements.

A series of sweeping proposed reforms to the banking sector, collectively dubbed the Basel III Endgame (B2E) were slammed by JPMorgan CEO Jamie Dimon as “overcalibrated” on an earnings call this month – “what person in what ivory tower thinks that is a rational thing to do?” he asked.

"The ongoing and persistent increase in the regulatory cost of market-making for banks suggest that the regulators want dramatic changes to the current operation of the U.S. capital markets" he fumed to analysts.

Strong language, six years after the global Basel Committee agreed additional capital rules that require banks to hold more reserves; reforms that followed bank bailouts after the 2008 financial crisis. (The EU, UK, and US are currently finalising the details of these “Basel III” requirements.)

Whilst finer detail on the Basel III Endgame remains to be delivered (“the absence of detailed analysis supporting a capital increase of this magnitude is disconcerting” Dimon said on an October 13 earnings call) it seems clear that they will affect not just capital requirements – JPMorgan would need 45% increase in its capital requirements relative to 2017 for example – but also notably affect banks’ IT and data requirements.

Indeed, complying with Basel III, and particularly the Basel Committee on Banking Supervision (BCBS) rule 239 "Principles for effective risk data aggregation and risk reporting" creates what Peter Ku, Chief Strategist, Banking, Capital Markets and Financial Services, Informatica, describes as “a profound data management challenge for Global Systemically Important Banks and Domestically Systemically Important Banks alike.”

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