21 October 2003

Regulators hold to Basel II deadlines

IT-Director.com | Regulators hold to Basel II deadlines:

Monday 20th October 2003

The Basel Committee on Banking Supervision is to stick to its end-2006 deadline for the introduction of new bank capital rules, despite committing to a last-minute overhaul designed to simplify implementation of the regulatory framework. I think that is commendable - good to see the regulators are not being held to ransom by the market

Improvements to the current framework include: changing the overall treatment of expected versus unexpected credit losses; simplifying the treatment of asset securitisation, including eliminating the 'Supervisory Formula' and replacing it by a less complex approach; revisiting the treatment of credit card commitments and related issues; and revisiting the treatment of certain credit risk mitigation techniques. This means that the Final Accord will be out by mid-2004, and not end 2003 as promised, but on the whole the Basel Committee does not believe that it will impede financial institutions from implementation of the Accord by the 2006 deadline.

It must be understood that the recommended changes are at the more granular level, however the fundamental framework and requirements are not any different - the key drivers remain. So what are these key drivers?

The most significant issue facing banks in relation to Basel II is aligning and upgrading data and existing IT systems infrastructure for completeness, consistency and integrity across the organisation. The systems to comply with Basel II requirements under the advanced approach for both Credit and Operational risk must be compatible with the existing IT architecture and provide suitable reporting facilities and analytics."

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