Compliance for the sake of compliance: Basel III in Asia
The challenges faced in Basel III’s implementation in Asia are significant, as regulators play the important role of adapting Basel III within their respective environments, to the needs of their respective local banks. May 09, 2012 | Levina LimThe Risk and Regulation Conference in this year’s Asian Banker Summit kick-started with the much talked-about topic since its introduction by the Basel Committee of Banking Supervision, Basel III. Trust is the pillar in banking, and the erosion of trust has forced law to take the place of trust in safeguarding the industry. Basel Committee of Banking Supervision (BCBS) first introduced Basel I, which was flawed due to its failure to recognize that different asset categories in the balance sheet have different levels of risks. Basel II addressed this issue, by focusing on banks’ Risk Weighted Assets (RWA). Unfortunately, this was brought a tad too far, with certain parties manipulating algorithms in their attempt to reduce RWA, thereby reducing the banks’ required capital. Now, the Basel III aims to fix the weaknesses of RWA usage by turning its attention to the numerator as a capital measure rather than the denominator. The situation in Asia differs from the West - Banks in Asia are more bank-based than market-based, the banking models that they utilize are less complex with a strong focus on trade, and banks are generally smaller and hold less capital than their Western counterparts. Dick Kovacevich, chairman emeritus of Wells Fargo, pointed out that, during the pre-crisis days, banks that have their heads down in operations and conservative trade with disciplined execution of good risk management practices, gained the most after the crisis. Others, who experimented with CDOs and tweaked convoluted mathematical logarithms to post quick profits pre-crisis, lagged behind due to the need to restructure and reorganize themselves. However, this same focus on trade, which had served Asian banks pre-financial crisis, may also be conservative banks’ Achilles heel – punishing smaller banks, in particular, in the area of regulation, post-crisis. Although the more stringent Basel III rules are meant to improve financial stability of the indus... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: Asian Banker Summit 2012, Basel III, Regulation, Risk and RegulationAsian Banker Summit 2012,Basel III,riskregulation,Risk and Regulation, Asian Banker Summit 2012,Basel III,Regulation,Risk and Regulation, Keywords:Risk And Regulation Conference, BSBC, Basel III Implementation, Risk Management Practices, Dick Kovacevich, Muliaman Hadad, Fang Du, Colin Lawrence Risk and Regulation Conference, BSBC, Basel III Implementation, Risk Management Practices, Dick Kovacevich, Muliaman Hadad, Fang Du, Colin Lawrence
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