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Financial Solutions
Basel II
Banks are in the business of risk management. However, as the pace of business fastens, banks face increasing pressures to modernise their overall risk management framework and build more robust risk management systems. Unfortunately, even after the 1997 Asian financial crisis, with certain exceptions, risk management remains largely underdeveloped in Asia, putting Asian banking institutions at a disadvantage relative to foreign banking institutions. There is a growing need for Asian banks to adopt sophisticated risk management techniques to manage rapidly changing risk exposures. The Basel II Capital Accord provides banks with a unique opportunity to do this.
A unique risk-based solution
The sheer complexity of Basel II and its inter-linkage with other significant local regulations necessitates that financial institutions undertake a systematic and disciplined approach to achieving compliance.
JLT Asia has designed a unique risk-based approach that applies structured and logical steps to operational risk aspects of Basel II. It provides banks with a sound basis for longer-term business continuity, income stability and shareholder value protection, allowing banks to make the most of the full benefits that this revolutionary international banking regulation stands to offer.
Expert Advice
JLT Asia is a leading advisor on Basel II. We maintain close contacts with Asian regulators, allowing us to provide expert counsel to our clients on the ramifications of the Accord on operational risk and insurance.
In addition to JLT Asia's Basel II Capital Accord consultancy services, JLT Financial Solutions for banks encompass:
- Risk Analysis and Financing Options - advice on choice and management of vehicles including captive insurance companies
- Risk Bearing Capacity Analysis – extent of risk to be retained
- Business Continuity Planning
- Insurance Programme Management
- Project Finance - Construction & Political Risk Insurance Advisory
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Basel II Background
Basel II is an enhancement of the first Basel Capital Accord, a set of rules- and regulations-based efforts to mitigate market and credit risk aimed at internationally active banks. Basel II extends the scope of risk-based regulation by introducing a new category - operational risk. Aimed at strengthening the financial system through a combination of tighter internal controls, market discipline and supervision, Basel II poses significant management challenges, with strategic business implications for Asian banks.
The new accord is scheduled for implementation by the end of 2006. The implementation date applies to the Basel committee members only, primarily the G-10 countries, but failure on the part of Asian banks to comply may lead to them being shut out of the global banking system.
Basel II provides international best practices on governance and risk management which banks can use as a benchmark to modernise and upgrade their overall risk management practices and infrastructure. Many banks view Basel II as an opportunity to go beyond regulatory compliance to achieve a distinct competitive advantage in a tight global market. The Accord provides opportunities for banks to establish the long-term sustainability of their franchises, income stability and to protect shareholder value. |
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