Banks To Build Holistic Risk Systems: Survey

by CXOtoday Staff    Mar 12, 2007

A survey conducted by Oracle India, i-flex solutions and the Indian Banks’ Association (IBA) reveals that a majority of Indian banks plan to build comprehensive risk management systems while progressing on Basel II compliance initiatives.

The survey seeks to understand challenges Indian banks faced on the road to Basel II compliance, and was conducted among Indian bankers as part of a larger Basel II seminar called “Basel: Uncover the Code”, recently hosted in Mumbai by Oracle, i-flex solutions and IBA.

The survey claimed to understand nuances of Basel II compliance and assess preparedness of Indian banks for Basel II compliance. The Basel II Accord aims at reducing risk in the financial system worldwide by aligning each bank’s capital requirements to more accurately reflect credit, market and operational risks.

The Reserve Bank of India (RBI) has recently extended its Basel II compliance deadline from March 31, 2007 to March 31, 2008, to provide banks with more time to put in place appropriate systems, so as to ensure compliance with Basel II guidelines.

A notable finding of the survey was that all surveyed banks viewed the postponement as an opportunity to adopt a more comprehensive approach to Basel II compliance, rather than slacken pace of adoption. Indian banks are now planning for Basel II implementation under the three pillars of Basel II.

“Implementation of Basel II will improve the Risk Management System in banks and will result in improved processes,” says H. N. Sinor, Chief Executive, IBA.

94% of the bankers surveyed mentioned process standardization, cost control, standardizing and storing data, and acquiring necessary skill sets, as primary challenges for Basel II compliance.

The survey claims that public sector banks and private banks rated process standardization as a primary concern, while foreign banks and co-operative banks rated cost control as a primary concern. The survey claims that one of the key challenges for Indian banks in adopting a standardized approach was data management.

Commenting on the survey findings, Deepak Ghaisas, CEO-India Operations and CFO, i-flex solutions, says, “The survey findings demonstrate maturity of the Indian banking sector, in their approach to Basel II compliance. Banks should view the Basel II regulations as a means to strengthen their risk management systems rather than merely as a compliance issue.”