Data quality in banking: Regulatory requirements and best practices

Abstract

Since the beginning of the financial crisis in 2007, the quality of risk data has become a subject of concern for risk managers in banks and other financial institutions. In order to tackle this subject a four-step analysis is proposed. First, the issues associated with risk data quality in the banking sector are examined, the main one being the silo organisation of risk data. Secondly, the paper reviews the existing data quality regulations in the financial sector, summarising briefly the requirements in Basel II and in Solvency II (the first regulation that provided formal requirements for data quality). Thirdly, a best practice proposal is made for banks in a centralised approach to risk data, involving the integration of risk and finance data. Finally, the centralised data approach is combined with a sensitivity technique in order to obtain more effective data quality strategies and indicators.