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Basel II Compliance - Diagnostic - Audit & Implementation 2014
Basel II Compliance - Diagnostic - Audit & Implementation 2014
Compliance
Diagnostic Analyzer
Your first step to review your banks state of Basel II compliance.
Introduction
Basel II is a Best Practice international standard for bank capital
risk management. It is the international standard of choice for most
banks to measure and manage the amount of risk and capital. It is
in the interest of each bank to be able to survive adverse economic
cycles in order to continue to offer an attractive return for its
shareholders. The ability to survive is linked to the quality of its risk
selection and management processes and to its capital endowment.
The Central Bank of Nigeria (CBN) issued the guidance notes on
Regulatory Capital Measurement and Management for the Nigerian
Banking System (for the Implementation of Basel II/III) (BSD/DIR/
CIR/GEN/LAB/06/053).
Accordingly, all bank and banking groups are expected to adopt
the basic approaches for the computation of capital requirements for
credit risk, market risk and operational risk as follows:
Credit Risk The Standardized Approach (TSA) is to be
adopted, however all forms of corporate claims will be treated
as unrated.
Market Risk The Standardized Approach (TSA) is to be
adopted.
Operational Risk The Basic Indicator Approach (BIA) is to be
adopted.
Our Proposal
A 5-Day Basel II/III Diagnostic
audit, review and gap analysis,
Implementation of Basel II/III
in your organization
Process Breakdown:
Implementing Basel II (III) generally involves the
following assessments and addressing their outcomes:
Internal Impact Assessment: Improved Risk Management
Drives Need for Quality Data (Pillar 1 & 2)
Key Questions To Be Answered:
o Are internal risk management systems and processes
adequate to determine all your risk exposures (for
example, market, credit, operational, and liquidity risks)
and to derive your capital requirement calculations?
o Are internal controls sufficiently aligned with the risks?
o How does your risk profile affect your regulatory and
economic capital requirements? Can it be optimized?
How does it react to crises?
o How will regulatory capital costs be allocated to
business lines? Do we have a code of ethics supported
by the appropriate tone at the top to ensure that risks
are properly managed?
o Do we recognize our shareholders expectations for risk
appetite?
Customer Impact Assessment: Changing Business
Relationships (Pillar 2) Key Questions To Be Answered:
o Do you collect the right data about both our existing
and new customer relationships and make sure that it is
complete, consistent, sufficiently frequent, and available
as necessary?
o Do you analyze data appropriately to manage
and mitigate customer risks and to strengthen the
relationship with the customer?
o Do you make use of rating systems appropriate to
customers, the business, and your inherent risks?
o What information do you need to determine who should
be your customers? How will you make those decisions?
o Do you use data to offer the right product to the
customer?
Global Impact: Improved Financial Market Stability
(Pillar 3) Key Questions To Be Answered:
o Which disclosure strategy/policies should you adopt?
o What are your competitors or peers doing, both banks
and non-banks?
o How can you communicate information externally in a
meaningful way? Should you disclose stress-testing and
scenario analysis efforts?
o What are the possible approaches to disclosure? Can
disclosure become a competitive advantage?
o What additional impact will rating agencies gain on
cost of capital via market disclosure?
Specific Deliverables
Others
Timeframe
Modeling
Probability of Default
(all)
Loss Given Default (all)
Model Validation
Group Model Risk
Audit
Group Internal Audit
Market Risk
Market Risk Models Market Risk Docs
Operational Risk
Operational
Risk Models
Operational Risk
Charge model
Scorecards
(AS, BS, CS, etc)
EL = PD x LGD x EAD
Credit RWA
= Kx12.5xEAD
K = f(PD, LGD, M, R)
Market RWA
OR RWA
Operational Risk
Policy Documents
Operational Risk
Documents
Recent Projects
Consultancies: A
Consultancies: B
Consultancies: C
There are many challenges along the way but we have both the
local and global expertise to assist you in actualizing your Basel
II/ III objectives.
Contact Us:
Victor Nkomo
victor@avantgardenig.com
(NG) +234 81 0323 1613
(SA) +27 11 655 7225
Funmi Tytler
funmi@avantgardenig.com
(NG). +234 80 2448 4963
Adebola Akapo
Adebola@avantgardenig.com
+234 80 9179 9577
Physical Address: Pro Space Center, 18A Olu Holloway (formerly Temple) Road, Ikoyi, Lagos, Nigeria
www.avantgardenig.com
Our Partners