SunGard has released the results of a recent survey on global banks’ systems readiness to comply with Basel II Pillar II requirements. Pillar II will require most banks to assess internal capital for a much wider range of risks than the credit, market and operational risks covered under Pillar I.
While the SunGard survey found that most responding institutions are still in early planning stages, it also determined that many banks recognised the business benefits of measuring previously unrecognised risks and that they plan to use these measures for risk-adjusted decision-making across business lines.
The SunGard survey, conducted during the third quarter of 2006, polled 61 banks from Europe, the Middle East, Africa, the Americas, the Asia-Pacific region including Japan to gauge their Pillar II aims and progress, especially with regard to the risk-and-capital systems that lie at the heart of Pillar II compliance.
The results reveal that 60 percent of participating banks have not yet selected the tools they will need to meet Pillar II requirements, likely because Pillar II is open to the detailed interpretation of local regulators around the world. Nearly 80 percent of banks say their Pillar II projects are still being defined, in the early planning stages, or underway. Only 16 percent of respondents claim their project is partially complete, and a mere 5 percent, all from Europe, have finished and fully integrated their Pillar II systems.
“It’s clear from our survey that banks are taking Pillar II compliance seriously, though many Pillar II projects are far from complete,” says Suhas Nayak, the director of Basel II for SunGard’s BancWare business unit. “Banks around the world are recognizing the benefits of including the new kinds of risk outlined in Pillar II in their internal capital adequacy calculations. Investing in Basel II technology, such as SunGard’s BancWare Capital Manager, that incorporates these risk measures into a holistic framework for capital adequacy and risk-adjusted decision making, will help banks apply enterprise-wide risk management beyond regulatory compliance to help favourably impact profitability.”