Singapore and Korea issue Basel II deadlines

SINGAPORE -- Regulators in Singapore and Korea are the latest to issue guidelines for Basel II implementation that set deadlines for the rollout of the new framework in their respective markets. In Korea, banks have until the end of 2007 to meet the Basel II requirements, with the Financial Supervisory Service (FSS) and Financial Services Commission (FSC) opting for a single implementation date for the standardised and advanced approaches.

In Singapore, however, financial institutions will be expected to implement Basel II in line with the timetable suggested by the Switzerland-based Basel Committee on Banking Supervision, meaning those institutions aiming for the basic and standardised approaches will have to comply with the new framework from the end of 2006. Those banks with approval from the Monetary Authority of Singapore (MAS) to implement the advanced approaches to credit and operational risk will have an extra year to prepare for implementation, until the end of 2007. However, even now, the timetable is not set in stone. MAS adds that it may still decide on a single implementation date of end-2007, depending on the implementation schedules of other regulators and the rollout plans of its own banks.

The guidelines follow a flurry of announcements from other Asia-Pacific supervisors in the past few months, including the Australian Prudential Regulation Authority, Japan’s Financial Services Agency and the Hong Kong Monetary Authority (HKMA).

However, MAS differs from some other regional supervisors in its approach. Most notably, the regulator states that those banks implementing the advanced internal ratings-based approach for credit risk will be expected to show "demonstrable progress" towards "eventual adoption" of the advanced measurement approach (AMA) to operational risk. This is in contrast to the HKMA, which ruled out the adoption of AMA in the initial stages of Basel II implementation.

"I think most banks in Singapore will start with the foundation approach and will then progress to the advanced approach," says Chng Sok Hui, managing director and head of group risk, at DBS Bank in Singapore. "At that time, MAS will want to see that banks have taken steps to put in place an advanced approach for operational risk. I think that’s logical."

The Korean regulators believe that banks operating in Korea will initially only see "slight changes" in their capital ratios as a result of Basel II implementation. However, unlike Singapore, Korea’s banks do not yet have a deadline for submitting their Basel II implementation plans. "We are going to ask banks to submit their detailed Basel II implementation plans sooner or later," says an FSS official in Seoul. "But the deadline is not yet finalised." OpRisk

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