Risk reporting compliance in the South African banking sector

Abstract

Lessons learned from dealing with real-time risk management during the COVID-19 pandemic were different from those learned from the 2008 global financial crisis. A set of principles introduced by the Basel Committee on Banking Supervision (BCBS) were intended to improve risk management and decision-making processes for banks. Current research appears not to address the practicality of these principles and the compliance of South African banks with these principles. The purpose of this research was to explore the South African banking industry's compliance with BCBS 239. Using qualitative document analysis, this study employed documents available in the public domain, downloaded from the five biggest banks in South Africa. The results indicate that not all South African banks have achieved full compliance with BCBS 239. The initial full compliance status deadline was 31 January 2017, set by the South African Reserve Bank (SARB); however, two of the Big Five banks achieved it only by the year ended on 31 December 2022. The three other banks claim to be aligned with the Risk Data Aggregation and Risk Reporting (RDARR) principles. The results show that there are significant challenges facing the banking sector in South Africa in terms of risk reporting compliance. Since each bank publishes the information in a different way, there are notable variations in the risk reports. These findings are important to understand the impact of strong governance procedures as well as data management in relation to how the financial institutions will be able to withstand dangers and tumultuous changes during any potential crisis by putting the BCBS 239 principles into practice. This study is seemingly the first to investigate the South African banking industry's compliance with BCBS 239 in respect of making better risk-based decisions.