Risk management and stability better under Basel II, but industry unprepared

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Basel II will improve risk management and stabilise the banking system, but almost half the industry is not sure they will be ready in time.

A survey carried out by the Professional Risk Managers’ International Association (PRMIA), an educational institution, found that while more than 90% of bankers thought Basel would promote better risk management, and almost 80% of respondents believed the banking industry would become more stable, only 56% of bankers said they would definitely be ready in time for implementation. Just 14% of regulators thought all the banks they supervise were prepared for the framework’s introduction. But 55% believed the larger banks would be able to deal with the rules.

More than half of bankers thought their capital requirements would fall. 36% expected requirements to fall by more than 10%. The majority (62%) were sceptical about whether regulators could deal with the advanced models. Most were concerned about distortions, such as differential treatment across the banking and trading books, that Basel II will create.

PRMIA’s poll also found that 72% of bankers, 69% of regulators and 81% of consultants believed that Basel III is needed.

More than 1,000 people, the majority of whom were bankers, responded to the survey. Almost 60% of bankers were from larger institutions. Respondents came from 89 countries. The US was the best represented, with 14.5% of respondents from here. More than 10% resided in the UK, and more than 40% came from the G10.

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• Topics
• Basel II
• Risk management
• Foreign exchange
• Basel Committee
• Operational risk