Commonwealth Governors Meeting: Basel II

1
Commonwealth Governors MeetingBasel II the
IIFResources and Regulatory Perspectives

• Lisa Kaess, ATRIUM advisors, for the
• Institute of International Finance, Inc.
• September 18, 2005 Bridgetown, Barbados

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Basel Committee and AIG Structure
Basel Committee on Banking Supervision Chairman
Jaime Caruana (Spain) Vice Chairman Nick Le Pan
(Canada) Secretary General Ryozo Himino (BIS)
Accord Implementation Group
Other Groups
Core Principles Liaison Group
Capital Task Force
Accounting Task Force
Capital/QIS
Validation
Capital Working Group
Corporate Governance
LGDs
LGDs
Research Task Force

Operational Risk
Cross-Border Banking
Risk Management/ Modeling
Accounting and Capital
Accounting and Capital
Trading Book (jointly with IOSCO)
Note Chart based on discussions with Basel
Committee staff.
3
Basel II IIF Structure
Chair Daniel Bouton Societe Generale
Task Force on Home/Host and Implementation Issues
Regional Chief Risk Officers Forum
Chair Tom de Swaan ABN Amro
Chair TBD
Middle East and North Africa
Latin America

• IIF Banking and Regulatory Professional Staff
• David Schraa, Director
• Andrés Portilla, Policy Advisor
• Molly McGregor, Policy Analyst
• Mohini Singh, Policy Analyst

Asia
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IIF - Consultation with regulators industry

• The Institute works with key global regulatory
  policy entities, including
• Basel Committee on Banking Supervision
• and its working groups
• Financial Stability Institute (FSI)
• Joint Forum
• International Accounting Standards Board (IASB)
• International Auditing Assurance Standards
  Board (IAASB)
• International Organization of Securities
  Commissions (IOSCO)

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IIF - Consultation with regulators
industryRecent highlights

• Trading Book
• Basel/IOSCO Committee meetings for industry
  perspectives (June).
• Dialogue between SCRC Chairman Bouton Jaime
  Caruana before Basel Committees July Meeting
  (June).
• Stress (or Downturn) Loss Given Defaults (LGDs)
• IIF WGCA meeting with Basel Committee Working
  Group on Downturn LGDs (Regulators discussing
  proposals with industry groups (IIF/ ISDA).
• Private Sector interested in how regulators will
  interpret the Basel Committees Guidance, with
  concerns to avoid divergent interpretations.
• Corporate Governance
• IIF organized a special task force to provide
  industry feedback on revision of the Basel
  Committees 1999 Guidance on Corporate
  Governance. The Committee has asked the IIF to
  comment on specific issues.
• Home-Host Issues
• IIF Home Host Task Force meets AIG in Amsterdam
  (Sept.).

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Example of current issue Accord recalibration
-- coordination of the QIS4/5 and the Parallel Run

• QIS 4 (Snapshot)
• Already completed or underway in several
  jurisdictions.
• National exercises, not coordinated through Basel
  Committee (although could use Basel-produced
  worksheets).
• QIS 5
• To be conducted between October and December
  2005. Analysis of results to be completed in Q1
  2006.
• It will involve up to 30 jurisdictions.
• Its results will be the basis for the
  recalibration of the Accord.
• Parallel Run (Long term testing)
• Basel Committee decided that guidance will be
  provided by each national regulator, not by the
  Committee.
• Issues
• Short prep time for QIS 5 and Parallel Run
  concerns that data for new areas (eg. Trading
  Book) will not be fully integrated into systems.
• Raise awareness to avoid use of sub-optimal data
  in final calibration.

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IIF Committed to a successful Basel II
implementation around the world

• Dialogue on implementation issues is critical
• Coordination of home and host supervisors,
  particularly outreach to non G-10 supervisors.
• Consultation with the industry on outstanding
  issues.
• Encouraging transparency among regulators
• Recalibration QIS and parallel run processes.
• Also on home/host agreements and choice of
  national discretions.
• A global Accord requires a global regulatory
  culture. The IIF offers an industry window.

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The Institute and its resources

• The Institute represents views of nearly 350
  members in over 60 countries
• Annual Membership Meetings
• Global Steering Committee, working groups, tasks
  forces on regulatory issues.
• Chief Risk Officers forums and specific
  regulatory initiatives around the world.
• Open Programs
• Training Programs
• Collaborations with the FSI, Central Banks, and
  Industry Associations
• October 5 Eastern European Banks (w/FSI)
• November 21 Asian Banks (w/FSI)
• November 30 Open Program in Bahrain Basel II
  Risk Management
• IIF Committed to a successful implementation of
  the Basel II Accord.

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Commonwealth Governors MeetingBasel II The
IIFResources and Regulatory Perspectives

• Contact Information
• David Schraa, Director Lisa Kaess, President
• Regulatory Affairs Department ATRIUM advisors
• Institute of International Finance Tel
  1.212.838.3900
• Phone [phone] Fax [phone]
• Fax [phone] Email lkaess_at_att.net or
• Website www.iif.com lkaess_at_atriumadvisors.com
  

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Appendix Useful Resources on Basel II

• 1. Basel Committee website (http//www.bis.org/bcb
  s/)
• 2. Committee of European Banking Supervisors
  (CEBS)
• (http//www.c-ebs.org/)
• 3. Global Risk Regulator (GRR) - a subscription
  service
• (www.globalriskregulator.com)
• 4. BaselAlert - a subscription service
  (www.baselalert.com)
• 5. UK FSA (www.fsa.gov.uk)
• 6. Board of Governors of the Federal Reserve
  (www.frb.gov)
• 7. Global Consultants Deloitte, EY, KPMG,
  McKinsey, Mercer Oliver Wyman, PWC
• 8. Rating Agencies Fitch, Moodys, SP also
  look at EM agencies
• 9. Asian Regulators (www.emeap.org or
  www.info.gov.hk/hkma)
• 10. Risk Center (www.riskcenter.com)
• 11. EU Financial Services Page (http//europa.eu.
  int/comm/internal_market/finances/index_en.htm)