Risk management and the implementation of the Basel Accord in emerging countries: An application to Pakistan.

Masood, Omar and Fry, J. M. (2011): Risk management and the implementation of the Basel Accord in emerging countries: An application to Pakistan.

Abstract

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
• Language: English
• 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

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