The Banking Data Warehouse and the Sarbanes-Oxley Act

Financial Institutions are facing a series of related risk and compliance challenges. These include:

- Sarbanes -Oxley Act
- Basel II
- IFRS / IAS

All of these different regulatory initiatives require data to be collected, analyzed and reported in different formats and under different timescales. Much of the data needed for one regulatory regime may also be required for the other regimes. It is obvious that if the data collection can be performed only once and made available in integrated shared structures, then the task of producing multiple different analytical reports will be greatly simplified. Further, since all reporting will be sourced from the same data, then all business, regulatory and compliance reports will be consistent with each other.

The Sarbanes -Oxley Act (SOX) places particular and specific needs on the CEO and CFO of a business to ensure that the financial results they are reporting are accurate and available in a timely fashion.

Section 302 requires the CEO and CFO to state quarterly and annually that inter alia: the financial statements do not contain any untrue statements or omit any material facts that would make the statements misleading; the financial s tatements fairly present the financial position, cash flows and operations; that procedures and controls in the formation of the statements are in place and are capable of being audited. While such declarations are mitigated by a "to the best of their knowledge" clause, it is likely that a "if they didn't know, they should have known" regime will be applied.

Section 404 requires that critical financial systems must be under strict controls and that the annual report must contain a statement signed by the CEO and CFO that any filings with the SEC are accurate. If such a statement is later proved to be false, then a jail term is a possibility. Section 408 requires the business to able to demonstrate at least every three years that no disclosures are missing or incomplete.

Section 409 requires that material events must be timely and accurately disclosed by the financial institution. Material events must be reported within 48 hours. A material event would include, for example, the bankruptcy of a large obligor or the collapse of an economy in which the financial institution has considerable investments.

All the above make it imperative that the financial institution maintains accurate business and operational data and that key performance and control indicators can be generated and monitored within short timescales. However, many financial institutions will be aware of some or all of the following issues in their existing data infrastructure:
- Reliance on manual spreadsheets and other tools outside of an auditable data environment
- Inconsistencies in reporting definitions and calculation formulae
- Excessive length of time to collate data for existing reports resulting in slow end of period closure
- Inflexibility of existing data structures resulting in long delays to meet new requirements
- Limited insight into performance and predictability of the business, both end-to-end and enterprise-wide.
- Lack of data quality and integration

The key, then, is to ensure that data is collected and stored in a manner usable by all current and future business and regulatory requirements. This is not a trivial goal to attain, but there is a major upside ? achieving a high quality data infrastructure is also exactly what is needed to run the business efficiently and profitably and is also what is required to fulfil other regulatory requirements in addition to Sarbanes -Oxley.

The IBM Banking Data Warehouse (BDW) is a design for such an enterprise data integration environment. BDW version 3.3 has comprehensive support for Sarbanes -Oxley integrated with the business data of banking. Many financial institutions are now using BDW to support common and consolidated data requirements across all aspects of their business as represented below.

The benefits of using the BDW as the financial institution's data integration hub containing a single consolidated view of data include:

- Integrated business and compliance information
- Increased flexibility to address new requirements
- Faster response to new requirements
- Ability to track historical changes
- Ability to show data as at a point in time
- Ability to better leverage data across lines of business
- Increased consistency in data usage
- IT cost savings due to a reuse of population, storage and reporting components