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Basel II The new Basel II Accord is
intended to build on the 1st Basel Accord that came into operation in 1988.
Basel 1, whilst covering the main principles of risk, left certain areas
uncovered and was generally a crude measure of risk. Also, the fact that the Accord
is now more 15 years old means that it is largely out of date and does not take
into account the new developments in the market that have taken place since its'
introduction.
Although Basel II is intended to have
a largely capital neutral effect overall, the intention is that capital charges
will be more closely aligned with the internal group risk operations of a bank.
The following are the main advantages of Basel II:
- A more flexible,
risk sensitive approach
- Incentives
for better risk management
- Better
competitive equality
- More
emphasis on a bank's own internal control, management and risk assessment
- Encourages
Market Discipline
- A
wider range of credit risk mitigation techniques
The
new Basel II accord is split into 3 pillars:
-
Pillar
1 is the minimum capital requirement. This encompasses the new concept of operational
risk and a new credit risk framework. The market risk framework will remain largely
unchanged. -
Pillar
2 covers supervisory review. This is intended to ensure that banks have sound
internal processes to assess adequacy of capital based on risk evaluation.
-
Pillar
3 covers market discipline. Market discipline takes the form of disclosure requirements
that are intended to provide information about a banks exposure to risks arising
from the methodologies chosen in Pillar 1. The aim is to provide a means of disclosure
between banks. In
the EU, Basel II will form the basis of CAD3 that will be
the minimum legal requirement that will apply to both banks and investment firms.
The new accord is expected to come into force on 1st January 2007, although this
deadline has already been delayed for 12 months for the implementation of the
more complex risk management-type methods, although the EU has yet to formerly
agree to the proposals.
Elsewhere, the US appears to only be insisting on adoption of Basel
II by the biggest banks, although some others are expected to apply the new
directive also. Other regulators and governments must individually declare their
intentions after taking time to assimilate the proposals and conclude the impact
on their own markets and institutions of Basel 2.
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What's It All About?
STB
are experts in regulatory reporting around the world and will, of course, be introducing
the upgrades for Basel II to all its regulatory solutions as a standard
part of the STB-Reporter service, as each regulator starts to apply the reporting
changes.
This will mean that the new Basel 2 reporting requirements
can be produced fully automatically, assuming that clients have adequate data
and that the configuration of their systems has been adjusted. STB will produce
a detailed data analysis document in each relevant country as each regulator defines
their specific implementation of the Basel 2 Accord and provide advice
and assistance if needed.
Behind STB-Reporter
lies STB-SuperConsolidator, which means:
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Any data in, any data out |
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Any data from anywhere to anywhere
else | |
In any structure, text or database.
Or both | |
Oh yes, and any database |
|
Relational or object model, it does
not matter | |
Business information is delivered
with a minimum of IT overhead | |
Business users can maintain it |
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One project to deliver maximum outputs |
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Reduction of duplicated datafeeds
and duplicated data | The
strategic advantages to an organization of having such clarity and confidence
in the data that defines their business is obvious. STB-SuperConsolidator delivers
this. A host of data management functionality, with no practical limitations,
ensures that any and all data-related issues that obstruct management’s view
of the actuality of their business can be broken down. A
Basle 2 regulatory reporting solution from STB is a strategic acquisition. It helps
clients develop and manage complex data and reporting requirements. As an interface
between source data and reporting requirements, the system can be leveraged to
deliver datafeeds, system migration, audit inspections, what-if analyses, head
office, regional, branch and business unit data, comparisons, exceptions, you
name it. This is a system that pays for itself. A
combination of powerful data table mapping routines, with unlimited data acquisition
methodologies, upscale data management rules delivering data append and splits,
and dropping of duplicated or irrelevant data, provides for an exceptional information-production
system. And as for the regulatory reporting implications of Basel 2, just
leave that to the experts!
Don't
wait for improvements in subsystems that may never come - for more information
about your business, please ask for more information about ours! Please go to
our Information & Feedback link. Request
a copy of STB's analysis document on Basel II.
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