| Author | Gurung, Vickrant |
| Call Number | AIT RSPR no.SM-06-24 |
| Subject(s) | Risk management
|
| Note | A research study submitted in partial fulfillment of the requirements for the degree of Master of Business Administration, School of Management |
| Publisher | Asian Institute of Technology |
| Series Statement | Research studies project report ; no. SM-06-24 |
| Abstract | Basel 2 is considered as very important risk management guideline to be issued by the Bank of International Settlement (BIS). However like any other guideline issued by an international body it requires considerable understanding and implementation has challenges. However the fact remains that there is a considerable activity in the bankine sector regarding Basel 2. Basel 2 is more than a regulation that requires banks to maintain a 8% capital adequacy ratio subject to its risk weighted assets. The Basel 2 is more risk sensitive than Basel I. It outlines 3 risks credit risks, market risk and operational risk. For each of the 3 risks the accord high lights methods for measurement. One of the innovations in the new accord is that it encourages banks to develop their own risk management model. This is primarily because there is diversity in risks and the triggering factors among nations. The committee therefore is aware that the banks an supervisors of the respective nations are in the best position to asses the risks in their banking sectors. This accord is a very comprehensive approach to risk management. It extends beyond capital adequacy to touch area of supervision and market disclosure. However like any new regulation there are critiques who say it is complicated and costly. This is however to be seen. It is complicated because the banking activities and risk aversion techniques have become complicated. The cost part can be taken as an investment as there are potential benefits to the banks from this reggulation. The fact however is certain that the development of banking sector is not the same throughout the globe. Basel 2 is a sophisticated risk management accord and requires higher level of sophistication on the part of the banks. Due to this reason it is expected to have early adapter and nations lagging in the implementation. But whatever the development stage of the banking sector it is for the banks to plan their implementation. The banks that implement the accord will have an advantage over those that do not. For China as an example the challenges are great but with careful planning and support implementation and compliance can be possible. The banking environment is a primary driver of banking regulations. The years from 1988 through the 1990's has seen as number of economic crisis and also collapse of major banks. Most of the crisis that have occurred have exposed weaknesses in the banking sector. One of the primary weaknesses was bad lending and bad risk management. In this hindsight it is imperative that risk management be improve. This need is even more among the Asian banks. Basel 2 is a step towards enforcing banks to be more risk sensitive. As a means to do this the Basel 2 accord is requiring the banks to use their capital as a cushion for the possible risk. Basel 2 is part of a drive on the part of regulators to make convert the capital held by banks from a mere regulatory to economic capital |
| Year | 2006 |
| Corresponding Series Added Entry | Asian Institute of Technology. Research studies project report ; no. SM-06-24 |
| Type | Research Study Project Report (RSPR) |
| School | School of Management |
| Department | Other Field of Studies (No Department) |
| Academic Program/FoS | Master of Business Administration (MBA) (Publication code=SM) |
| Chairperson(s) | Tang, John CS.; |
| Examination Committee(s) | Kouwenberg, Roy;Amoussou- Guenou, Roland; |
| Scholarship Donor(s) | AIT Fellowship; |
| Degree | Research Studies Project Report (M.B.A.) - Asian Institute of Technology, 2006 |