Information Management and Pillar 3

What is Information Management

According to Davis’ definition, Information Management is ‘the process through which relevant information are timely provided to decision makers’. This means that the value of knowledge generated by data elaboration is used to provide decisional and operative support to corporate management.

Managers or corporate boards receive reports including information needed to take strategic decisions and maintain the control over the company.

For instance, the Risk Manager, the Internal Audit and the Compliance Manager use information to ensure bank’s compliance with relevant regulations and avoid actions that could be damaging for the institution.

The process of information management is linked to technological infrastructures, organisations and human resources. Each department of the banks is involved, from staff entering the operation in the administrative system (front office), to the functions involved in its management, analysis and disclosure.

The first and the second step mainly involve human resources, while the following ones relates to the area of Information Technology (IT).

The process related to Information Management has to comply with certain requirements, to produce reports that are useful for decisional purposes. They include:

• Data quality (data governance);
• Information processing (business intelligence);
• Presentation consistency in the reporting structure.

Each aspect is fundamental to achieve a reliable and meaningful result, for investigation purposes. An appropriate data management cannot exclude the compliance with the above-mentioned requirements.

 

Advantages of Information Management

In the banking sector, where technologies and processing could make the difference, Information Management has several advantages. Big Data analysis can rapidly create:

• Competitive advantages for the bank;
• Strategic and operational solutions for the Board;
• Monitoring and control of the compliance with regulations for the Compliance Manager;
• Risk monitoring for the Risk Manager;
• Check and management of internal procedure for the Internal Audit;
• Analysis of capital and liquidity absorptions for the CFO;

The opportunities offered by a sound and stable information management are relevant for each institution’s department, but mainly for senior managers.

The Basel Committee took steps in this field, since it has deemed necessary to remedy to the lack of information in the system, considering the financial shock originated in 2007.

 

Third Pillar of Basel Framework – Pillar 3

In the context of the implementation of Basel II principles, to strengthen sectorial discipline, a disclosure requirement has been introduced for intermediaries. They have to provide information on capital adequacy, risk exposure and characteristics of identification, assessment and management process (Pillar 3 – Third Pillar of Basel 2).

Basel II framework was based on three Pillars:

• First Pillar – minimum capital requirements
• Second Pillar – Supervisory review process
• Third Pillar – Disclosure requirement

‘From 1^st January 2014 the new prudential framework for banks and investment firms has entered into force; it is included in the Regulation (EU) No. 575/2013 2013 (Capital Requirements Regulation, CRR) and Directive 2013/36/EU (Capital Requirements Directive, CRD IV), implementing in the European Union standards established by the Basel Committee for Banking Supervision (Basel III framework)’.

Basel III Regulation does not change the approach based on three pillars, provided for in the previous framework, but it introduces some integrations to the Third Pillar, for a greater transparency and improved information of capital composition and on capital ratios calculation.

In details, its aims at improving institutions’ capacity to disclose their capital structure, risk exposure and capital policies.

Disclosures related to Third Pillar, that intermediaries are required to produce at least with an annual frequency, have undergone many integrations, to create an improved standardised presentation structure at a European level.

Characteristics of Pillar III

Pillar III is structured in synoptic tables, referred to a specific information area:

• qualitative, providing a description of the methodologies and process for the assessment of risk management;
• quantitative, returning data on capital composition of credit instituions and risks to which they are exposed.

 

Pillar III: constraint or opportunity for banks?

Banks should not consider Pillar III requirement only as a burdensome operational constraint linked to data governance, but also as an opportunity to improve Information Management, both in terms of quantity and quality.

The quality of data is meaningful for the management of the process, since an erroneous or non-consistent value could jeopardise the whole database and the deriving processing for information management.

Data Governance and Information Management represent the foundations for the production of a sound and reliable disclosure.

In case a bank does not have the appropriate tools to deal with these requirements, Pillar III offers the possibilty to improve the system. This process can take place thanks to the support provided by IT infrastructures, which allow to perform rapidly qualitative analysis of the big databases.

In this context, TIGREARM suite developed a dedicated Module

 

PILLAR III: the solution proposed by Save Consulting in the TIGREARM suite

This Module is related to data governance and, starting from the filling of regulatory reporting, allows to produce reports required by Pillar III of Basel.

Operative advantages, mainly relating toRisk Management, allow to:

• Avoid a de-structured recovery of information from different corporate sources;
• Save at least 70% of the time required;
• Manage information according to predefined and certified logics, under EBA Guidelines and European Regulations;
• Produce a qualitative set of information with limited and simple passages and reduced elaboration time;
• Define the control system, also for regulatory compliance purposes, and information auditability;
• Make reports available (information management) with information that can be navigated backwards, from final data to its basic components.

Like all other TigreArm modules, it is web-based and it can be used also for remote working