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Lack of data poses risk to banks, says S&P

30 May 2002  |  3093 views  |  0 graphs

The banking industry's ability to effectively manage risk continues to be hampered by the ongoing need for more data, according to the Standard & Poor's Risk Management Benchmarking 2001 report.

"Although there is definitely a trend toward the integration of risk management across categories of risk and throughout the institution, better collection and management of internal data is clearly necessary," says Roy Taub, executive managing director of Risk Solutions.

The report was developed by a consortium of more than 50 large and small banks around the globe working with Standard & Poor's Risk Solutions group.

Key findings of the study reveal few banks have more than five years of reliable internal data on probability of default and fewer still have data for loss given default. Also, while banks are using internally developed models to extend their risk management capability, most lack the appropriate historical data to develop and support theses models.

Only half of the banks in the study say they include risk management in their strategic planning process. And while the majority of banks look at credit, market, and operational risk, each aggregated separately, across the institution, only a minority have a well-established aggregation methodology for operational risk, says the report.

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