Financial institutions need to wake up to Basel II. (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 Basel II is the second of the Basel Accords, which are recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision. The purpose of Basel II is to create an international standard that banking regulators can use when creating regulations ) 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 Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. , 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 re·vamp tr.v. re·vamped, re·vamp·ing, re·vamps 1. To patch up or restore; renovate. 2. To revise or reconstruct (a manuscript, for example). 3. To vamp (a shoe) anew. n. 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 See Y2K problem and Y2K compliant. Y2K - Year 2000 millennium problem, albeit on a smaller scale. Enterprise level data collection, standardisation Noun 1. standardisation - the condition in which a standard has been successfully established; "standardization of nuts and bolts had saved industry millions of dollars" standardization 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 capital reserves. Basel II requires a consistent standard set of workable definitions to be developed for all risk management data. Unavoidably, data collection from multiple operational systems will generate data duplication and quality issues, but cleansed cleanse tr.v. cleansed, cleans·ing, cleans·es To free from dirt, defilement, or guilt; purge or clean. [Middle English clensen, from Old English data will be required for accurate risk analysis. There must be a transparency of the entire process of rating, mapping and back testing back testing Using historical data to determine the relationship of specific variables. For example, a researcher might use historical data to determine if changes in the money supply have influenced changes in stock prices. for third party validation and this will be more easily achieved if data handling and processes are fully documented.. It is paramount that Basel II issues are raised at a senior management level and that organisations develop a dedicated steering committee steer·ing committee n. A committee that sets agendas and schedules of business, as for a legislative body or other assemblage. steering committee Noun to determine and define roles, responsibilities and ownership of particular projects. Organisations must start understanding Basel 11 requirements; they must understand choices of approach and cost benefit; they must map business units to Basel business lines and above all, they must conduct an analysis of their systems/data, decision support model, data'structures, information and reporting capabilities. www.sagent.com |
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