Basel III framework may not always accurately represent capital strength
Chng Sok Hui, CFO of Singapore's DBS, discusses the impact of new capital rules on Asian banks, how BCBS seeks to address them, and the need for local adaptation. February 21, 2013 | Foo Boon PingOn the implementation of Basel III, Chng feels that Asian banks are ahead of their counterparts in the US and Europe in their preparedness for implementation of the enhanced capital requirements, but thinks that this could be a source of competitive disadvantage. “The new capital charges create an unbalanced playing field. Some jurisdictions like Singapore have introduced Basel III with the AVC and CVA capital charges effective January 1st 2013 while others such as the EU and the US have delayed implementation. It is a challenge for us to compete when the playing field is uneven,” she surmises. The Basel Committee of Banking Supervision (BCBS) recognises concerns voiced by banks that the new capital framework may not always provide a “meaningful and comparable representation of capital strength” in how local regulators have transposed Basel agreements into domestic regulations. In a recent speech, chairman of BCBS, Stefan Ingves, said that “differences in regulation and application can undermine the regulatory framework by making it more difficult for bank depositors, counterparties, investors, shareholders and supervisors to have confidence that reported capital ratios serve their intended purpose.” He cited concerns that banks are not calculating risk weighted assets consistently. Asian banks typically have a higher level of risk-weighted assets to total assets, which means that they are setting aside more capital than their European or US counterparts with the same capital adequacy ratio. From its investigation the committee noted that there is a material variation in risk weights for trading assets across banks and the choice of modelling approach seem to be the major drivers of the variation in risk weights. While the objective is not to have zero variation as diversity in risk management practices may be desirable to prevent banks from acting in a similar manner, the committee does admit that excessive v... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: Basel III, Regulation, Risk and Regulation, Singaporebasel III,riskregulation,Risk and Regulation,Singapore, Basel III,Regulation,Risk and Regulation,Singapore, Keywords:DBS, Chng Sok Hui, AVC, CVA, BCBS, Stefan Ingves DBS, Chng Sok Hui, AVC, CVA, BCBS, Stefan Ingves
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