Firms slow to implement Basel II
Survey finds only five per cent of banks on track for regulatory compliance
Only five per cent of banks have finished and fully integrated their Basel II Pillar Two systems, according to a survey by software firm SunGard.
The Basel II financial regulations are built on three pillars: Pillar One, the determination of regulatory capital, Pillar Two, banking supervision and Pillar Three, market discipline enforced by greater disclosure of banks' financial status and their internal risk management procedures.
Basel II is designed to facilitate a more comprehensive, sophisticated and risk-sensitive approach for banks to calculate regulatory capital. Basel II will enable banks to align regulatory requirements more closely with their internal risk measurement and to improve operational processes.
The survey found almost 60 per cent of banks have not yet selected the tools they will need to meet Pillar Two requirement and the report finds this is most likely because Pillar Two is open to the detailed interpretation of local regulators around the world.
'It’s clear from our survey that banks are taking Pillar 2 compliance seriously, though many Pillar 2 projects are far from complete,' said Suhas Nayak, director, Basel II, SunGard’s BancWare business unit.
'Banks around the world are recognising the benefits of including the new kinds of risk outlined in Pillar 2 in their internal capital adequacy calculations,' he said.
Pillar 2 will require most banks to assess internal capital for a much wider range of risks than the credit, market and operational risks covered under Pillar 1.
The SunGard survey, conducted during the third quarter of 2006, polled 61 banks from Europe, the Middle East, Africa, the Americas, the Asia-Pacific region including Japan.
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