Implement Basel-II to cut banking risks

Posted: ফেব্রুয়ারি 16, 2009 in Economics

Now it is the right time for Bangladesh to implement the standards of Basel-II for minimising risks in the banking sector, said Adviser to the Prime Minister on Economic Affairs Dr Mashiur Rahman yesterday.

Implementing Basel-II will help reduce the internal risks of banks in the time of global financial meltdown, he said.

“The standards of Basel-II will also help identify the risky lending areas,” Mashiur said.

Basel-II is the second of the Basel Accords, which are recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision.

The purpose of Basel-II, initially published in June 2004, is to create an international standard that banking regulators can use while creating rules about how much capital banks need to put aside to guard against financial and operational risks banks face.

Mashiur was speaking at a seminar on “Basel-II and its Implications for Bank Capital Raising” at Sonargaon Hotel in the city as chief guest.

The World Bank and Citi Bangladesh jointly organised the daylong seminar, which was attended by a good number of managing directors, chief executive officers and high-ups from different public and private banks and financial institutions.

At the inaugural session of the seminar Xian Zhu, WB country director in Bangladesh, said compared to Basel-I the scope of application in Basel-II is broader and includes on a fully consolidated basis all major internationally active banks at every tier within a banking group, as well as at the level of the group’s holding company.

“Supervisors also need to ensure that individual banks within the group remain adequately capitalised on a stand-alone basis. Significant minority investments, where control does not exist, as determined by national accounting and/or regulatory practices, would either be deducted from equity or consolidated on a pro-rata basis,” Zhu said.

“I would like to emphasise that the challenges of implementing Basel-II are heightened in turbulent financial markets, and this transition must be managed carefully to mitigate any unintended effects,” he said.

The WB official said the Basel-I capital accord, published in 1983, represented a major breakthrough in the international convergence of supervisory regulations concerning capital adequacy.

Although the Basel-I framework helped ‘level the playing field’ and stabilise the declining trend in banks’ solvency ratios, it suffered from several problems that became increasingly evident over time, he added.

Daniel McNamara, Citi’s co-head of Investment Banking for the Asia Pacific, said: “Citi is humbled to be a part of such an important initiative and we are committed to the mobilisation of our global resources to facilitate transition of the banking sector of Bangladesh into Basel-II.”

Mamun Rashid, Citi country officer in Bangladesh, said implementation of Basel-II is needed for a better and transparent tomorrow.

“If we can implement the standards of Basel-II in the banking sector, we will get a more accountable Bangladesh,” he said.

Faruk Ahmad Siddiqi, chairman of the Securities and Exchange Commission, among others, spoke at the seminar.

The daily star 17.02.2009




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