Questions have been raised in Asia Pacific regarding possible unfairness created by a staggered implementation of Basel II. Hong Kong, Singapore and Australasia are all planning to adopt the advanced approaches to capital calculations for the majority of their banks. They will also implement compliance with these rules in 2008 – 2007 for the smaller banks adopting the basic or standardised approaches. However, the rest of Asia, countries like China, the Philippines and Thailand, are all planning a longer implementation over a period of up to five years following 2008. This means that the early adopters of Basel II practices could be operating at an advantage in capital terms over those other Asian countries working to longer timescales.
"With different applications, I'm not sure it goes in any big way to try and create a level playing field," Loh Boon Chye, Head of Global Markets for Asia at Deutsche Bank, said at a conference in Manila last week. "It suggests that it (Basel II) will probably be difficult to implement," Loh added, and suggested that the Asian banking regulators in the less advanced countries should get together to agree a common timetable for applying Basel II rules within their jurisdictions.
The conference concurred that Asian banks were not finding the implementation of Basel II easy, a view confirmed by a recent E&Y Basel II survey which suggested that banks across the world were still concentrating on embedding credit risk processes and that other areas, particularly Pillar III, the disclosure requirements, were receiving less attention with only 25% of banks seeing this as a 2006 priority.
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