Masood, Omar and Fry, J. M. (2011): Risk management and the implementation of the Basel Accord in emerging countries: An application to Pakistan.
Download (444kB) | Preview
This paper addresses an important contemporary issue; namely the implementation of the Basel Accord worldwide. The Basel Accord provides a series of measures to improve the stability of the world’s financial system but its implementation poses a number of challenges for both developing and emerging economies. Pakistan faces a number of unique challenges in this regard due to its recent economic expansion and the fact that the rate at which the Basel Accord is being adopted lags behind that of other countries. This paper throws light on this and a number of related issues due to a combination of the novelty of the survey data from risk managers coupled with a rigorous statistical analysis. Results reflect that the Basel Accord is generally well regarded due to its underlying aims of improved capital standards and a scientific treatment of risk. However, operational risk emerges as a key barrier to implementation in Pakistan. A number of further obstacles are highlighted, which, do seem to have been addressed although only with a partial degree of success. Privately owned banks appear to be more technically competent and more favourably disposed towards implementation than publicly owned banks.
|Item Type:||MPRA Paper|
|Original Title:||Risk management and the implementation of the Basel Accord in emerging countries: An application to Pakistan.|
|Keywords:||Risk Management; Basel Accord; Banking; Financial Regulation; Emerging Markets|
|Subjects:||C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C10 - General
O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O53 - Asia including Middle East
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages
|Depositing User:||John Fry|
|Date Deposited:||17. Oct 2011 14:32|
|Last Modified:||12. Feb 2013 13:37|
AIF: DISCLOSURE SUBCOMMITTEE, 2004. Frequently Asked Questions. Basel II- International Convergence of Capital Measurement and Capital Standards – A Revised Framework. AIF: Disclosure Sub Committee. http://www.standardbank.co.za/SB_IMAGES/Group/baselfaqs.pdf [Accessed on March 28th 2011].
Amidu, D., 2007. Determinants of Capital Structure of Banks in Ghana: An Empirical Approach. Balt. J. of Manag. 2, 67-79.
Bailey, R., 2005. Basel II and Developing Countries: Understanding the implications. Development Studies Institute Working Paper Series No. 05-71.
Barakat, A., 2009. Banks Basel II Norms Requirement regarding Internal Control: Field Study on Jordan Banks. Delhi Bus. Rev. 10, 35-48.
BCBS, 2001. The New Basel Capital Accord: an explanatory note. BCBS. http://www.bis.org/publ/bcbsca01.pdf [Accessed on April 2nd 2011].
BCBS, 2004. Internal convergence of Capital Measurement and Capital Standards: A Revised Framework. BIS. http://www.bis.org/publ/bcbs107a.pdf [Accessed on May 25th 2011].
BCBS, 2006. International Convergence of Capital Measurement and Capital Standards. A Revised Framework. Comprehensive Version. June 2006. BIS.
Bingham, N. H., and Fry, J. M., 2010. Regression: linear models in statistics. Springer, London Dordrecht Heidelberg New York.
BIS, 1999. Capital Requirements and Bank Behaviour: The Impact of the Basel Accord. BCBS Working Paper No. 1.
BIS, 2004. G10 Central Bank Governors and heads of Supervision Endorse the Publication of the Revised Framework. Press Release. http://www.bri.org/press/p040626.htm [Accessed on March 23rd 2011].
BIS, 2008. The BIS and the pursuit of global financial stability. BIS. http://www.bis.org/about/global_financial_stability.htm [Accessed on March 15th 2011].
Carauna, J., 2004. Basel II – emerging market perspectives. BIS Rev. 68, 1-4.
Cornford, A., 2006. The Global Implementation of Basel II: Prospects and Outstanding Problems. Available at SSRN http://ssrn.com/abstract=1278049. [Accessed on May 17th 2011].
Cumming, S and Nel, H., 2005. Capital Controls and the lending behaviour of South African Banks: Preliminary findings on the expected impact of Basel II. S. Afr. J. of Econ. 73, 641-656.
Dobson, W. and Hufbauer, G. C., 2001. World Capital Markets: Challenge to the G-10. Peterson Institute.
Dupuis, J., 2006. The Basel Capital Accords. Library of Parliament-Canada. Economic Division. Parliamentary Information and Research Service. http://www.parl.gc.ca/information/library/PRBpubs/prb0596-e.pdf [Accessed on January 15th 2011].
Engelen, K. C., 2005. BIS Birthday Blues: Uneasy Times As The Bank For International Settlements Turns 75. Int. Econ. 19, 46-51.
Federal Reserve Board, 2007. Risk-Based Capital Standards: Advanced Capital Adequacy Framework — Basel II. ttp://edocket.access.gpo.gov/2007/pdf/07-5729.pdf [Accessed on May 12th 2011].
Folpmers, M., 2010. Decoding Basel III: Buffers, Benefits and Bonuses Breaking down Basel III’s complex new capital and liquidity rules for banks, and exploring their short term and long term macroeconomic impact. Risk Prof. December 2010, 30-34.
Global Risk Regulator, 2005. South Africa Gives Basel II High Priority. Global Risk Regulator Newsletter. January. http://www.globalriskregulator.com/archive/January2005-04.html [Accessed on April 15th 2011].
Gordon-Hart, S., 2004. Basel II: The Risk to the Global Consensus. Balanc. Sheet J. 12,22-26.
Griffith-Jones, S. and Spratt, S., 2001. Will the proposed New Basel Capital Accord have a net negative effect on developing countries? Unpublished Report, Institute for Development Studies.
Hai, S. S., Minnhaj, S. Q., and Ahmed, R., 2007. Implementation of Basel II: Issues, Challenges and Implications for Developing Countries. Preprint. http://www.hull.ac.uk/php/ecskrb/GDP2007/SESARO-58110.pdf [Accessed on April 27th 2011].
Hassan Al-Tamimi, H. A., 2008. Implementing Basel II: An Investigation of the UAE Banks’ Basel II Preparations. J. of Financ. Regul. and Compliance 16, 173-187.
Heid, F., 2003. Is regulatory capital pro-cyclical? A macroeconomic assessment of Basel II. Deutsche Bundesbank Working Paper.
IMF, 2005. Implementation of Basel II - Implications for the World Bank and the IMF. IMF.
Jacobsohn, O., 2004. Impact of Basel II on the South African banking system. Magister Commercii in Business Management, Rand Afrikaans University.
Makwirmiti, A. M., 2008. The implementation of the New Capital Accord (Basel II) : A comparative study of South Africa, Switzerland, Brazil, and The United States. Unpublished Master of Commerce Thesis, Department of Economics and Economic History, Rhodes University, Grahamstown South Africa. http://eprints.ru.ac.za/view/creators/Makwiramiti=3AA=2E_M=2E_=3A=3A.html [Accessed on April 21st 2011].
Mboweni, T. T., (2004) The South African Banking sector: An overview of the past 10 years. BIS. http://www.bis.org/review/r041231f.pdf [Accessed on April 5th 2011].
McCullagh, P., and Nelder, J. A., 1989. Generalised linear models, Second Edition. Chapman and Hall.
Mehra, Y. S., 2010. Operational Risk Management in Indian Banks: Impact of Ownership and size on Range of Practices for Implementation of Advanced Measurement. Preprint http://www.igidr.ac.in/money/OPERATIONAL%20RISK%20MANAGEMENT%20IN%20INDIAN%20BANKS.pdf. [Accessed on April 21st 2011].
Neville, L., 2005. Basel II: A step up the ladder. Risk Mag. November 2005.
Ong, M, K., 2004. Introduction to the Basel II Handbook: A Guide for Financial Practitioners. Basel II Handbook. www.baselalert.com [Accessed on April 18th 2011].
Reisen, H., 2001. Will Basel II contribute to convergence in international capital flows? Unpublished Report, OECD Development Centre, Paris.
Rime, B. 2001. Capital requirements and bank behaviour: Empirical evidence for Switzerland. J. of Bank. and Financ. 25, 789–805.
Sahajwala, R., and Van den Bergh, P., 2000. Supervisory risk assessment and early warning system. Basel Committee on Banking Supervision Working Papers. No. 4, December.
SKOSANA RISK MANAGEMENT COMPANY, 2006. Basel II overview. Skosana Risk Management (Pty) Ltd. http://www.skosana.co.za/services.htm [Accessed on May15th 2011].
Snedecor, G. W., and Cochran, W. G. 1989. Statistical Methods, Eighth Edition. Iowa University Press, Iowa.
Swiss Federal Banking Commission, 2005. Annual Report: Key Themes. http://www.ebk.admin.ch [Accessed on January 27th 2011].
Taylor-Powell, E. 1998. Questionnaire Design: Asking questions with a purpose. University of Wisconsin.
Taylor-Powell, E., Hermann, C., 2000. Collecting Evaluation Data: Surveys. University of Wisconsin
van Rixtel, A., Alexopoulou, I., and Harada, K., 2004. The New Basel Capital Accord and Its Impact on Japanese Banking: A Qualitative Analysis. In Gup, B. E. (Ed.) , The New Basel Capital Accord. South-Western.
Venables, W. N. and Ripley, B., 2002. Modern Applied Statistics with S, Fourth Edition. Springer, New York.
Ward, J., 2002. The new Basel Accord and development countries: Problems and alternatives. ESRC Centre for Business Research, Working Paper No. 04.