Basell II Confidence

B C fid
in the Banking
System
 What is Basel II?
„An international standard used by banking
regulators worldwide to determine how
much capital a bank needs to hold to guard
against
g financial and operational
p risks it
faces

Compared to Basel I, Basel II

„

‹Ismore risk-sensitive
‹Separates operational risk from credit risk

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 The Basel II framework
„ Based on 3 Pillars
‹ Pillar 1 – Minimum capital requirements
for 3 types of risks faced by a bank: credit
risk, market risk and operational risk
‹ Pillar 2 – Supervisory review process –
provides a framework for dealing with
other risks faced byy a bank
‹ Pillar 3 – Market discipline – relates to
the disclosures banks are required to
make depending on the methodologies
used to enable the market to better
assess their risk profiles

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 Risks captured under
Basel II
„ Credit risk
‹ Standardised Approach
‹ Foundation Internal Ratings
Ratings-Based
Based Approach
(F-IRB)
‹ Advanced Internal Ratings-Based Approach
(A IRB)
(A-IRB)

„ Market risk
‹ Standardised Measurement Method
‹ Internal Model Method

„ Operational risk
‹ Basic Indicator Approach
‹ Standardised Approach
‹ Alternative Standardised
S Approach
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 How Basel II has increased
confidence in the banking
system?
„ Policies and systems capability developed to fill
gaps identified and to provide for “building
blocks” for achieving compliance with respect to
credit, market and operational risk
„ Interaction between IT,, Finance,, Credit and Risk
and other Units to improve system platforms,
databases and data quality
„ Data
ata cclean-up
ea up process
p ocess in many
a y ba
bankss
„ Enhanced Management Information Systems
(MIS) for effective risk management
„ Some banks started to develop their data
warehousing capabilities in view of adopting the
advanced approaches in the future

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 COBIT – Basel II Mapping

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 COBIT – Basel II Mapping

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 COBIT Metrics

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 XBRL
„ XML Based
„ Taxonomy to define and control data quality
„ Used in conjunction
j with a computer
p network and
system to provide a near real-time monitoring
system
y for financial surveillance and statistic
collection.

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