Email News Service April 2005
Recent Basel II news: QIS 5 plans confirmed; US central banker says much work to be done
April 3 - Recent statements on the planned Basel II rules for bolstering the solvency of the world's banking system include the following:
BASEL, Switzerland - Global banking regulators confirmed last week their plans to undertake a fifth quantitative impact study -QIS 5 - into the effects of the complex Basel II upgrade of international capital rules for bank safety between October and December this year.
This calibration study will start three months earlier than previously envisaged, the Basel Committee on Banking Supervision, the architect of Basel II, said. The Committee, which comprises senior banking supervisors from North America, Europe and Japan, held its regular quarterly meeting at the end of March.
The Basel regulators will review the calibration of Basel II in the spring of 2006. The Committee believes this earlier date for potential recalibration will provide banks with more time to study the expected effects of the Basel II rules and aid implementation plans.
The Basel Committee is recommending that banks using the simpler and intermediate approaches to measuring their credit and operational risks under Basel II adopt the rules from end-2006, while banks using the advanced approaches start from end-2007.
In countries in which a QIS 4 is being conducted, QIS 5 might be either a partial update of QIS 4 or a new exercise. Banks will be provided with draft workbooks for QIS 5 in July 2005, the Committee said.
(www.bis.org)
PALM BEACH, Florida - Substantial work remains to be done before Basel II can go live, US Federal Reserve Board governor Susan Schmidt Bies has said.
Several areas in particular will require special efforts, she told the Financial Services Roundtable annual meeting last week. Data collection and validation are examples. Supervisors are working diligently to provide guidance on what is expected for data warehouses and validation, but banks are responsible for collecting the data they will need for the advanced approaches, Bies said. Similarly validation starts with the institutions' own independent checks on the adequacy of risk management and internal control process.
In the US Basel II will apply to a small number of the largest banks - estimated by analysts at 20 or so big banks that comprise the bulk of the country's banking assets - from January 1, 2008. These banks will have to use only the most advanced Basel II risk measurement approaches. The rest of the US banking system, comprising thousands of regional and smaller banks, will remain under the current, and much simpler, Basel I capital adequacy rules that date from 1988.
(www.federalreserve.gov)
Global Risk Regulator (info@globalriskregulator.com)
