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This story is from December 26, 2006
Basel II: Banks face execution problems
Time has come to the rescue of Indian banking sector, which finds itself in the midst of extended deadline to adhere to Basel II.
BANGALORE: Time has come to the rescue of Indian banking sector, which suddenly finds itself in the midst of extended deadline to adhere to Basel II. With RBI recently moving the deadline for adhering to Basel II from March 31, 2007 to March 31, 2008, financial software vendors i-flex and Infosys feel that banks with a certain degree of computerisation or core banking software (CBS) would find the migration to be much smoother.
Although banks must fall in line to the new deadline set by RBI, it is their preparedness so far that remains questionable.
"CBS system among banks is falling in place only now. Large banks have things under control. They will have to look at building on this framework. But all across, knowledge about implementation is the gray area," said Merwin Fernandes, Infosys Finacle V-P. There seems to be ambiguity on the manner of implementing Basel II norms among banks. Software vendors and banks are yet to take stock of the actual time and cost of migration, as this would vary from one bank to another.
"We are embarking on an enormous education drive to communicate to the banking community on Basel II. Banks that have some sort of server and computer type of operation need not necessarily start from scratch. They can start by investing on necessary hardware and software. But the most basic part of going to Basel II concerns with having a control on all the data and making it available online," explains Arun Pingaley, head, functional solutions experts group, Reveleus (an i-flex business).
The most crucial aspect of Basel II concerns capital calculation and reporting. This complex task involves calculation and auditing.
Although banks must fall in line to the new deadline set by RBI, it is their preparedness so far that remains questionable.
Considering the earlier deadline is just three months away, a lacuna still exists in the minds of bankers on the implementation of Basel II rather than awareness, say software vendors.
"CBS system among banks is falling in place only now. Large banks have things under control. They will have to look at building on this framework. But all across, knowledge about implementation is the gray area," said Merwin Fernandes, Infosys Finacle V-P. There seems to be ambiguity on the manner of implementing Basel II norms among banks. Software vendors and banks are yet to take stock of the actual time and cost of migration, as this would vary from one bank to another.
"We are embarking on an enormous education drive to communicate to the banking community on Basel II. Banks that have some sort of server and computer type of operation need not necessarily start from scratch. They can start by investing on necessary hardware and software. But the most basic part of going to Basel II concerns with having a control on all the data and making it available online," explains Arun Pingaley, head, functional solutions experts group, Reveleus (an i-flex business).
A report by Financial Insights estimates banks in Asian region could spend around $30-60 million each in their compliance efforts. The report adds that the estimated aggregates for banks in the 12 Asia-Pacific countries for implementing their new Basel II frame is $9.2 billion between 2002 and 2006. This constitutes 10-13% of their IT spend. Over half of this amount is estimated to be spent on IT systems and interfaces, with the rest going into collection, collation and cleansing of historical data.
The most crucial aspect of Basel II concerns capital calculation and reporting. This complex task involves calculation and auditing.
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