Following the worldwide financial crisis that started in 2008, the Basel Committee of Banking Supervision responded to the deficiencies in financial regulation by creating a regulatory framework that strengthens bank capital requirements.
Basel III, also known as the Third Basel Accord, was the framework created to strengthen bank liquidity and decrease bank leverage, or debt.
In addition to improving the banking sector’s risk management and governance procedures, making them more likely to be able to absorb financial and economic shocks, Basel III aims to strengthen the transparency of banks through liquidity and leverage disclosures. Under this regulatory framework, all banks must provide the Reserve Bank with regular updates on their liquidity and leverage profiles, and ensure they fall within the guidelines of solvency stipulated.
“Basel III effectively means that banks need to send a lot more information than they used to, and all major banks have to send updates on their liquidity position more than once a day,” explains Dylan Erens from Top Tier Consulting. “When the regulation comes into effect in January 2016, banks will be required to update the Reserve Bank on a real-time and regular basis, whereas before they were only required to send one update per day.”
This, he says, is not a simple reporting procedure, as the data must be pulled from a variety of different sources and provided on an instant and real-time basis. “Before, banks had all night with markets being closed to produce their reports, but they will now have to access the information instantaneously from across their entire operation.”
When one of South Africa’s largest banks approached the consulting house to assist with setting up the systems for the new reporting regime, they found a technological solution that makes producing the reports quick and easy. In addition to assisting the bank with its processes and procedures, Top Tier Consulting implemented a Business Intelligence (BI) tool to enable simplified access to the data.
According to Erens, the bank required six specific features, including a live dashboard to provide a real time view into the data. The bank also required the ability to pull data out of different systems and do calculations on it. The consulting house therefore researched the best possible solution for the bank, ultimately deciding on the Yellowfin BI tool.
“We analysed all of the information available on the various BI systems, including analyst reports such as the Gartner Magic Quadrant. Yellowfin scored best on all of the areas we required, but was the only product with the real-time electronic dashboard as a built-in feature. Yellowfin not only allows for the data to be imported, analysed and calculated with ease, the dashboard can be updated ‘live’ according to our specifications. Based on the bank’s requirements, the dashboard is updated every 30 seconds in order to provide immediate information on its liquidity status.”
However, there was a slight delay in implementing the right tool for the job, as the bank had existing licences for a BI product, which it requested the consultants use. “We tried to achieve the same results with the other product, but failed to attain the same level of real-time insight. When it became evident that we could not accomplish what the bank required with that product, we strongly suggested Yellowfin as the solution we had earmarked,” Erens says.
“The Yellowfin implementation was part of the larger project, and was so simple to do that only two people of our 12 member team were involved. Yellowfin has delivered everything we required and more, and is the ideal technological solution to help the bank meet its Basel III reporting requirements.”