Financial institutions need to wake up to Basel II.

Position:Management Products

Banks and financial institutions face potentially serious disruption and high costs resulting from their failure to recognise and act on the regulatory reporting obligations under the new Basel Capital Accord (Basel II) which is due to be implemented by 2006; says Sagent Technology

The three core elements of the Basel II accord are:

1--Minimum capital requirements, with new roles for credit and operational risk and an increased emphasis on banks' own internal capabilities in determining minimum capital requirements.

2--Supervisory review covering an institution's capital adequacy and internal assessment process.

3--Market discipline through effective disclosure to encourage safe and sound banking practices.

Comment:

IT departments within banks, insurance companies, and pension companies may be required to revamp their existing reporting systems, potentially requiring extensive system enhancements to enable integration of disparate data systems and applications. The impact of these changes is similar to that of the Y2K millennium problem, albeit on a smaller scale. Enterprise level data collection, standardisation and consolidation are critical to achieving Basel II compliance and the data management issues involved are vast Data from all operational systems across the enterprise will need to be collected and stored in a data warehouse to establish group-wide...

To continue reading

Request your trial