Banks face Basel II compliance issues

Two thirds of financial services firms unprepared for forthcoming regulation

Two thirds of UK banks are taking a ‘bare minimum’ approach to Basel II compliance, according to research from vendor Cognos.

The Basel II regulations have come about from an agreement among the banks to revise international standards for measuring the adequacy of a bank's capital, and seek to incentivise banks to improve their risk management processes.

The regulations are mandatory and come into force at the end of this year. The UK legislation to support the Basel II accord are known as the Integrated Prudential Sourcebook.

Laurence Trigwell, senior financial director at Cognos, says some banks are unprepared.

'With the financial risk management regulation due to come into force by the end of this year, some banks seem to think that it is just another regulation to adhere to, rather than realising that it forms the basis of a continuous risk management process,' he said. 'Two out of three banks only intend to meet the basic requirements while the other third are taking a more proactive and in-depth approach.'

'Taking a proactive approach to Basel II will ensure data is available across the business, from senior management down to the individual credit officer, so the bank as a whole will be better placed to make risk-based, rather than purely revenue-based decisions,' said Trigwell.

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