Wednesday, June 30, 2004

Final version of Basel II now available

Central bank governors and the heads of bank supervisory authorities in the Group of Ten (G10) countries met on the 26th June and endorsed the publication of the ‘International Convergence of Capital Measurement and Capital Standards: a Revised Framework’, the new capital adequacy framework commonly known as Basel II. The Basel II Framework sets out the details for adopting more risk-sensitive minimum capital requirements for banking organisations. The new framework reinforces these risk-sensitive requirements by laying out principles for banks to assess the adequacy of their capital and for supervisors to review such assessments to ensure banks have adequate capital to support their risks. It also seeks to strengthen market discipline by enhancing transparency in banks’ financial reporting. The text that has been released reflects the results of extensive consultations with supervisors and bankers worldwide. It will serve as the basis for national rule-making and approval processes to continue and for banking organisations to complete their preparations for the new Framework’s implementation.
Here's a link to the full final Basel II document

Sunday, June 27, 2004

World's bankers set tough risk rules in Basel II

Following five years of debate in the banking industry, Central bank governors and regulatory heads from the U.S., Europe and Asia approved on the 26th of June 2004 a major rewrite of global bank safety rules. Amongst them U.S. Federal Reserve Chairman Alan Greenspan, European Central Bank President Jean-Claude Trichet and Bank of Japan Governor Toshihiko Fukui. The Basel II Capital Accords govern how much cash banks must set aside as a buffer against risks. Regulators must still convince local politicians that the Basel II framework indeed will make the financial system more robust without causing too much trouble for the banking industry. Banks have complained loudly about the cost and complexity of the new system. Also certain banks, lending heavily to households, and financial services companies based on ultra low interest rates may be put in a difficult position should interest rates rise quickly. The rules begin taking effect at the end of 2006, for banks using the most basic formulas, or a year later for companies using the most complex approaches that take into account the internal credit ratings that lenders assign their customers. Application will probably vary by country. The EU is imposing the rules on all of its almost 8,000 banks, while the U.S. will require the guidelines only for big financial companies that compete abroad.

Tuesday, June 22, 2004

UK banks quicker to recover defaulted loans than German and French

UK banks have a far better recovery rate for defaulted loans to small and medium-sized enterprises than those in Germany or France, according to research published today. The study looked at 10 leading banks, four in the UK and three each in Germany and France, which between them represent more than a third of SME lending.
Recovery rates can be a source of competitive advantage for banks as they have considerable flexibility over how they deal with defaults, even though the new Basel II banking rules redefine default and set new standards for capital adequacy purposes. More

Thursday, June 17, 2004

The oldest notion of RM?

The oldest notion of managing risk that I could find is this one:
"Do not count your chicken before they stopped breeding". (Aesopus 550BC, Thracian poet)
I found this quotation on:
Advice on RM. Risk Quotes and Uncertainty Quotations
These are more cool quotations there on dealing with uncertainty. (You have to press F5 to get a new one).

Who knows of an even older risk phrase or quotation?