Big banks need to know what they\'re doing

Almost 10 years after the crash, information systems still aren\'t good enough.
  • 22 December 2017

"Know thyself," goes the Delphic maxim. You might think it superfluous advice for the world's biggest banks -- that the executives responsible for global finance would insist on a complete picture of the risks they're running. Yet the crash almost a decade ago showed they didn't know enough. And even now, their investment in self-awareness falls short.

When financial markets came under stress, the banks lacked timely and reliable information on their exposures to major counterparties. As a result, neither they nor regulators could fully understand the risks posed by the Lehman Brothers bankruptcy, or the extent to which the financial system was linked to a single London-based unit of U.S. insurer AIG.

Since then, global regulators have been striving to put this right. In 2013, the Basel Committee on Banking Supervision published a set of standards: Systemically important banks should be able to collect timely, complete and accurate data on their risk exposures at an enterprise-wide level, and provide concise reports to executives and supervisors.

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