When significant counterparties became distressed at the peak of the credit crisis, it took some institutions over a month to determine their exposure to the failed or failing business. This is in part because a failing counterparty could consist of thousands of distinct business subsidiaries, not all of which were easily linked to the parent company. Compounding this, a global bank like G. Sibley’s might have thousands of subsidiaries itself, each of which has exposures to the various counterparty’s subsidiaries. With no clear means of identifying and rolling up exposures to even one subsidiary on a bank-wide basis, G. Sibley was in trouble.
In the years that followed, the “what’s our exposure?” questions shifted to other dimensions rapidly, each time in response to an external triggering event: what was your exposure to a failed counterparty, including all its subsidiaries and related entities? To securities linked to subprime mortgages? To Greece?
None of us knows for certain what the future holds, however with a BCBS 239-based data management foundation, G. Sibley will have a linked data set, featuring risk and exposure information as well as multiple dimensions of classification, enabling him to quickly get answers to the “what’s my exposure to…” question no matter how that question is asked.
Look out for day twelve tomorrow.
By Steve Engdahl, SVP, Product Strategy, Goldensource