Chinese banks seek to learn from US counterparts to achieve Basel III compliance
Proceedings report from The Asian Banker’s dialogue on "Building a Strong and Stable Bank- The Role of the CEO in Risk Management” on the complexities of Basel III rules. May 10, 2013 | Research*The following is an extract of an important seven-page proceedings report on “Building a Strong and Stable Bank- The Role of the CEO in Risk Management”. The entire report is available in the Reports Purchase page here. William Isaac pointed out that pro-cyclical accounting and regulatory policies that were put in place two decades ago are important reasons why the world has found itself in the position it is in today. Isaac mentioned that sound banking regulations should always be counter-cyclical and lean against the prevailing winds. The Basel III models are far too complex and continue to mis-weight significant asset classes, and lack absolute standards. Chinese banking regulators are paying close attention to their US counterpart and are looking to learn more from them. While Chinese banks are planning on establishing branches in the US and are made to comply with Basel III, US banks themselves are yet to be Basel III compliant. Isaac responded by saying that he believed that the requirement should be made tougher, but one that should not be too complex to implement. According to an official from China Banking Regulatory Commission (CBRC), Chinese banks are in a different position compared to most banks in the world. Banks in western economies originate and sell, whereas Chinese banks originate and hold. There is a big difference between the two patterns. Isaac advised Chinese banks to diversify their portfolios by selling and buying participation in credit from other banks, thereby reducing their risk concentration levels. He noted that this has been a long-standing practice in the US. Isaac was also concerned that the temptation models would drive the government to use them to allocate credit. His specific concern dated back to the 1980s where regulators were pu... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: Basel III, Capital & Strategic Issues, China, Regulation, Risk and Regulationbasel III,Capital & Strategic Issues,China,riskregulation,Risk and Regulation, Basel III,Capital & Strategic Issues,China,Regulation,Risk and Regulation, Keywords:William Isaac, FDIC, Ma Lixin, CBRC, Shanghai Banking Association, Shanghai Banking Association, Accenture, Phillip Straley William Isaac, FDIC, Ma Lixin, CBRC, Shanghai Banking Association, Shanghai Banking Association, Accenture, Phillip Straley
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