Data Quality Reporting

From Open Risk Manual

Definition

Data Quality Reporting is the formal communication process within an organization (typically part of a Data Quality Management Framework) that conveys management information about Data Quality issues


ECB TRIM Requirements

Regulated banking institutions have compliance requirements around data quality reporting[1]

The institution’s senior management must ensure, on an ongoing basis, that the ratings systems are working properly. To accomplish this, a formal reporting process on the quality of risk data should be in place with the objective of improving the quality of data and enabling an assessment of the potential impact of data quality in own fund requirements calculations. In general, this reporting should be presented in a standardised format with clear and concise content, including the following:

  • Comprehensive overview of the performance of the model in terms of data quality, including external data and pooled data, if any, at all stages of the IRB life cycle, from data entry to reporting, for both historical data and current exposure data;
  • Findings and, where applicable, recommendations to address detected weaknesses or shortfalls;
  • Sufficient and appropriate evidence that the recommendations have been adequately addressed and properly implemented (e.g. by means of a status report).


The management body or a designated committee thereof and senior management must possess a general understanding of the rating systems of the institution and a detailed comprehension of its associated management reports. To comply with this requirement, reports on the quality of risk data should be submitted to these parties. In addition, it is good practice for these reports to also be submitted to all other relevant staff, including modellers, internal validation, internal audit, data quality managers, data owners and other business units involved.

Data quality reports should be produced and submitted to senior management more frequently than annually to enable senior management to ensure, on an ongoing basis, that the rating systems are operating properly in accordance with applicable regulatory requirements

Institutions must collect and store all relevant data to provide effective support to their credit risk measurement and management processes. Furthermore, good data quality is a fundamental condition for developing a robust rating system. To comply with these requirements and ensure the quality of data, institutions should have sound policies, processes and methods in place, under paragraphs 15 to 34 of the EBA GL on PD and LGD for assessing and improving the quality and representativeness of the data used in the modelling and risk quantification process.

References

  1. ECB guide to internal models - Credit Risk, Sep 2018

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