Requirements for systemic risk management in the financial sector

Abstract

The subprime financial crisis of 2008 exposed systemic weaknesses in the financial sector. Emergency liquidity on an enormous scale was required to prevent a collapse of the banking system. There is much discussion now concerning how to monitor and manage the risk of such systemic events. Our objective in this document is to discuss the computational requirements of systemic risk management. At a high level we address the basic functional and non-functional requirements of data and analytics posed by a hypothetical systemic risk regulator. To make our discussion concrete, we will explore the problem of systemic risk management in the residential mortgage markets of the United States. Our requirements discussion is organized around three main categories: data, analytics, and platform. We first review the basic features of data and analytics for the mortgage markets, and then will develop our thoughts concerning requirements for data management, analytics infrastructure, and platform functionality. Copyright 2009 ACM.