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  • RBI

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    Prathish
    6K vues14 pages
    KEYWORDS: Basel II, regulation, supervision, data, knowledge, implementation Basel II is basically 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 about how much capital banks need to put aside to guard against the types of financial and operational risks banks face. Basel II is believed to can help protect the international financial system from the types of problems that might arise should a major bank or a series of banks collapse. In practice, Basel II attempts to accomplish this by setting up rigorous risk and capital management requirements designed to ensure that a bank holds capital reserves appropriate to the risk the bank exposes itself to through its lending and investment practices. The Basel Committee on Banking Supervision has come up with three pillars namely, minimum capital requirements, supervisory review process and market discipline, the first one which tries to ensure that capital allocation is more risk sensitive, the second tries to separate the operational risk from credit risk, and quantifying both of them, the third attempts to align economic and regulatory capital more closely to reduce the scope for regulatory arbitrage. In the current thesis I have done a interview based research to get a knowledge of the challenges faced by the commercial banks during the process of implementing Basel II norms. The interview was done using an interview protocol prepared in consultation with my mentor at office. The mentor then helped me in securing appointments with General Managers of six different banks which have their head offices in Tamil Nadu. The interviews were taped and their transcripts used to arrive at the findings of the study. The major limitation of the project has been that the research, suggestions and conclusions have been confined to the banks in Tamil Nadu. There were different findings from the survey like; there has been a change in the quantum and quality of data being collected for the purpose of rating which had an impact on the manpower requirements of the banks. Most of the banks did not face any privacy or data security issues with regards to data collection. All of the banks surveyed either had separate set of people in the organization to implement the Basel II. The banks had their manpower trained at either the staff college or by National Institute for Banking Management; the need for more branches of the later banks is felt among the banks. Short term lending is being seen as an opportunity by the banks to divert the excess liquidity available with the banks and for better utilization of the short term resources. The banks which had actually calculated their capital requirements based on internal capital appraisal methods had their capitals well above the 9% limit set by the central bank. The variables considered for calculation varied from bank to bank. Pro-cyclicality did not seem to be a major issue with the bankers as they found the counter cyclical measures of the central bank very effective. With the advent of Basel II the amount available with the banks for lending has come down and tends to increase again when the advanced credit measurement approaches are introduced. Further suggestions and conclusions on how to better the implementation of Basel II have also been given, which are not confined to the Reserve Bank alone, but also to the Indian Banking Association.

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    KEYWORDS: Basel II, regulation, supervision, data, knowledge, implementation Basel II is basically 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 about how much capital banks need to put aside to guard against the types of financial and operational risks banks face. Basel II is believed to can help protect the international financial system from the types of problems that might arise should a major bank or a series of banks collapse. In practice, Basel II attempts to accomplish this by setting up rigorous risk and capital management requirements designed to ensure that a bank holds capital reserves appropriate to the risk the bank exposes itself to through its lending and investment practices. The Basel Committee on Banking Supervision has come up with three pillars namely, minimum capital requirements, supervisory review process and market discipline, the first one which tries to ensure that capital allocation is more risk sensitive, the second tries to separate the operational risk from credit risk, and quantifying both of them, the third attempts to align economic and regulatory capital more closely to reduce the scope for regulatory arbitrage. In the current thesis I have done a interview based research to get a knowledge of the challenges faced by the commercial banks during the process of implementing Basel II norms. The interview was done using an interview protocol prepared in consultation with my mentor at office. The mentor then helped me in securing appointments with General Managers of six different banks which have their head offices in Tamil Nadu. The interviews were taped and their transcripts used to arrive at the findings of the study. The major limitation of the project has been that the research, suggestions and conclusions have been confined to the banks in Tamil Nadu. There were different findings from the survey like; there has been a change in the quantum and quality of data being collected for the purpose of rating which had an impact on the manpower requirements of the banks. Most of the banks did not face any privacy or data security issues with regards to data collection. All of the banks surveyed either had separate set of people in the organization to implement the Basel II. The banks had their manpower trained at either the staff college or by National Institute for Banking Management; the need for more branches of the later banks is felt among the banks. Short term lending is being seen as an opportunity by the banks to divert the excess liquidity available with the banks and for better utilization of the short term resources. The banks which had actually calculated their capital requirements based on internal capital appraisal methods had their capitals well above the 9% limit set by the central bank. The variables considered for calculation varied from bank to bank. Pro-cyclicality did not seem to be a major issue with the bankers as they found the counter cyclical measures of the central bank very effective. With the advent of Basel II the amount available with the banks for lending has come down and tends to increase again when the advanced credit measurement approaches are introduced. Further suggestions and conclusions on how to better the implementation of Basel II have also been given, which are not confined to the Reserve Bank alone, but also to the Indian Banking Association.

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    RBI

    Transféré par

    Prathish
    KEYWORDS: Basel II, regulation, supervision, data, knowledge, implementation Basel II is basically 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 about how much capital banks need to put aside to guard against the types of financial and operational risks banks face. Basel II is believed to can help protect the international financial system from the types of problems that might arise should a major bank or a series of banks collapse. In practice, Basel II attempts to accomplish this by setting up rigorous risk and capital management requirements designed to ensure that a bank holds capital reserves appropriate to the risk the bank exposes itself to through its lending and investment practices. The Basel Committee on Banking Supervision has come up with three pillars namely, minimum capital requirements, supervisory review process and market discipline, the first one which tries to ensure that capital allocation is more risk sensitive, the second tries to separate the operational risk from credit risk, and quantifying both of them, the third attempts to align economic and regulatory capital more closely to reduce the scope for regulatory arbitrage. In the current thesis I have done a interview based research to get a knowledge of the challenges faced by the commercial banks during the process of implementing Basel II norms. The interview was done using an interview protocol prepared in consultation with my mentor at office. The mentor then helped me in securing appointments with General Managers of six different banks which have their head offices in Tamil Nadu. The interviews were taped and their transcripts used to arrive at the findings of the study. The major limitation of the project has been that the research, suggestions and conclusions have been confined to the banks in Tamil Nadu. There were different findings from the survey like; there has been a change in the quantum and quality of data being collected for the purpose of rating which had an impact on the manpower requirements of the banks. Most of the banks did not face any privacy or data security issues with regards to data collection. All of the banks surveyed either had separate set of people in the organization to implement the Basel II. The banks had their manpower trained at either the staff college or by National Institute for Banking Management; the need for more branches of the later banks is felt among the banks. Short term lending is being seen as an opportunity by the banks to divert the excess liquidity available with the banks and for better utilization of the short term resources. The banks which had actually calculated their capital requirements based on internal capital appraisal methods had their capitals well above the 9% limit set by the central bank. The variables considered for calculation varied from bank to bank. Pro-cyclicality did not seem to be a major issue with the bankers as they found the counter cyclical measures of the central bank very effective. With the advent of Basel II the amount available with the banks for lending has come down and tends to increase again when the advanced credit measurement approaches are introduced. Further suggestions and conclusions on how to better the implementation of Basel II have also been given, which are not confined to the Reserve Bank alone, but also to the Indian Banking Association.

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    BASEL II IMPLEMENTATION:

    Challenges Faced by Commercial


    Banks, Suggestions for
    Improvement
    Agenda

    Relevance & Objectives

    Introduction

    Process Involved

    Findings

    Suggestions and Conclusion

    Constraints

    Takeaways from the project


    Relevance & Objectives
     Identification of the need for the
    project
     Location of areas of trouble in
    implementation
     Possible suggestions
    Basel Implementation
     Purpose of BCBS
     Basel I
     Basel II
     Role of RBI
     Need for Basel III
    Process Involved
     Feasibility study
     Pilot study
     Geographic identification
     Research Target
     Interview Protocol
     Analysis
     Findings
     Suggestions and Conclusion
    Findings
     Increase in Data collection
     Privacy and security issues
     Lack of Clarity of the final outcomes
     No effect on Short term lendings
     Lack of interest to calculate ICAAP
     Number of rating agencies is few
     Lack of clarity on classification of
    expenses
    Findings
     No effect of Pro Cyclicality in India
     No haste in movement to AMAs
     Wait and watch regarding the
    comparability of capital standards
    post Basel II
    Validity of the findings
     Whom did I meet?
     Why did I choose them?
     The Interview
    The Experts
     Shri. R. Shaktivelu, General Manager, Karur Vysya
    Bank Ltd.
     Shri. R. M. Patnaik, General Manager, Indian Overseas
    Bank.
     Shri. Sri Ramanan, General Manager, Indian Bank.
     Shri. Sheshadri Rao, Assistant General Manager, Indian
    Bank.
     Mr. S. Sundar, General Manager, City Union Bank.
     Shri. Naganna Prabhakaran, General Manager, Lakshmi
    Vilas Bank.
     Officials at Tamil Nadu Mercantile Bank.
    Suggestions
    (do not confine to the reserve bank in particular but also the Indian
    Banking Association)

     Better implementation of Financial


    Inclusion programs
     Data Privacy and security needs more
    attention
     Special forum with in the frame work of
    IBA to discuss Basel challenges
     Increase in the number of NIBMs
     Classification of implementation
    expenses
     Regulation in calculation of ICAAP
    Suggestions
    (do not confine to the reserve bank in particular but also the Indian
    Banking Association)

     Awareness about the uses and


    advantages of credit ratings need to
    be furthered
     Need for capturing IT system losses
    under current framework
     Continuance of parallel run during
    the implementation of advanced
    approaches
     Strong corporate governance
    practices to be inculcated
    Limitations
     Geographical constraint
     Number of Banks under study
     Fear of Supervisory action
    Takeaways from the
    Internship
     First hand experience of government
    protocols and procedures involved
     Know-how of the regulatory
    requirements of commercial banks
     Vital contacts of all bank heads in
    Tamil Nadu
     Personal Satisfaction
    Thank You

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