This Basel proposal addresses risk-aggregation and reporting issues now generally addressed in Basel standards proposed as specific standards for boards, senior management, management information systems and supervisors. They would require significant changes in information technology at most large financial-services firms and pose a challenge to integrated cross-border operations where complexity and/or dataflow barriers impede corporate-wide aggregation and standardization. Reflecting the risk regulators fear when firms do not know the full scope of their risk and supervisors lack early warning of it, new board and senior-management requirements are also proposed. Although a detailed and technical consultative paper, it proposes serious sanctions – e.g., capital add-ons and activity limitations – for lapses.
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