Lloyds TSB on track for credit risk accord

Lloyds TSB says its IT systems are on track for complying with the deadline for the Basel II credit risk accord.

The company hopes to start testing its applications for Basel II by October, with final implementation going ahead in December. The accord comes into effect at the end of 2006, but banks must start recording historical data on 1 January 2004.

'We're in an advantageous position. In consumer banking, much of the work needed for the accord is already done, so we're confident that we're on track,' said Lloyds TSB credit risk director Shahram Sharifi.

The bank is installing specialised software from SAS to provide a foundation for its risk management.

The software will help the company comply with the accord, as well as improving its capital allocation, financial transparency and profitability.

'It's also a significant opportunity for us to improve how capital is allocated in various parts of our business according to risk. The software should also help us to create more tailored products and improve our profitability,' said Sharifi.

'Over the last 15 years, we've developed an IT infrastructure based on SAS that provides the basic foundation to address risk,' he said.

SAS software has also automated a number of manual processes, such as risk reporting, performance monitoring and credit scoring.

Under the accord's requirements, banks must consider how much capital they hold to mitigate risk. But some local banks think it is overly complex, will be difficult to implement and tough for national regulators to supervise.

Earlier this summer, the British Bankers' Association and the London Investment Banking Association filed a submission to the Basel II committee, trying to persuade them to loosen the proposed rules and delay the final deadline to 2010.

But Sharifi says Lloyds TSB will be up to the challenge.

'It's a very complex concept, but we've overcome many challenges in the past, so there should be no reason for us to fail. Successful compliance will bring big rewards for our customers and shareholders.'