Survey by i-flex Solutions, IBA & Oracle Indicates that Banks in India are Seeking to Build Comprehensive Risk Management Systems

i-flex Solutions Ltd has announced that A survey conducted by Oracle India, i-flex® solutions and the Indian Banks Association (IBA) has revealed that a majority of Indian banks plan to build comprehensive risk management systems while progressing on their Basel II compliance initiatives.

The survey sought to understand the challenges that Indian banks faced on the road to Basel II compliance, and was conducted among Indian bankers as part of a larger Basel II seminar called "Basel: Uncover the Code", that was recently hosted in Mumbai by Oracle, the Company and IBA. The seminar aimed at understanding the nuances of Basel II compliance and assessing the preparedness of Indian Banks for Basel II compliance.

The Basel II Accord aims at reducing risk in the financial system worldwide by aligning each bank’s capital requirements to more accurately reflect its own Credit, Market and Operational Risks. The Reserve Bank of India (RBI) recently extended the Basel II compliance deadline from March 31, 2007 to March 31, 2008, to provide banks with more time to put in place appropriate systems, so as to ensure full compliance of the Basel II guidelines.

A notable finding of the survey was that all surveyed banks viewed this postponement as an opportunity to adopt a holistic approach to Basel II compliance, rather than slackening the pace of adoption. Indian banks are now planning for Basel II implementation under all the three Pillars of Basel II, while addressing gaps in the implementation of Pillar I, such as the Credit Risk Mitigation process, Portfolio Segmentation process for retail exposures and more.

94% of the bankers surveyed cited Process Standardization, Cost Control, Standardizing and Storing Data, and acquiring the necessary Skill Sets, as the primary challenges to Basel II compliance. Of these, Public Sector Banks and Private Banks rated Process Standardization as their primary concern, while Foreign Banks and Co-operative Banks rated Cost Control as their primary concern.

The survey found that one of the key challenges for Indian banks in adopting the Standardized Approach was Data Management. Most Public Sector Banks are still in the process of rolling-out Core Banking Solutions across their branches, and the Standardization of data residing in myriad systems across various branches is proving to be challenging. Responses from Private Sector Banks indicate an advantage of "up-and-running" Core Banking Solutions, but these banks have to grapple with issues of Process Standardization.

Commenting on the survey findings, Mr. Deepak Ghaisas, CEO-India Operations and CFO, of the Company, said, "The survey findings demonstrate the maturity of the Indian banking sector, in their approach to Basel II compliance. Banks should view the Basel II regulations as a means to strengthen their risk management systems rather than merely as a compliance issue. Charting out a clear roadmap, identifying a dedicated internal team for the project, and setting timelines for Basel II compliance will maximize the benefits, as we have seen among banks in the advanced European and US markets."

One of the earliest providers of solutions for enabling RAPM in banks globally, Oracle Corporation has significant capabilities to provide a complete framework with Oracle Financial Services Applications (OFSA), the Company's Reveleus^TM Basel II solution has been chosen by banks of varied sizes including several leading tier 1 banks around the world to accelerate their Basel II compliance efforts. Oracle has entered into an agreement with the Company to resell the Reveleus Basel II solution, and their combined capabilities provide the global financial services industry with a comprehensive and robust risk management suite.

*Mr, Anand Sinha, Executive Director of the RBI, addressed the gathering of bankers at the seminar and stressed on the need for Indian banks to focus on;

- Internal Capital Adequacy Assessment Process (ICAAP)
- Stress Testing
- Credit Risk Mitigation process
- Self-assessment of Operational Risks and controls under Pillar II.
- Transparency and Auditability

Source : Equity Bulls

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