The biggest challenge faced by the UAE banks in implementing Basel II guidelines is the quantification of operational risk - the risk of failure of systems, processes and people.
The challenges facing UAE banks while they implement Basel II guidelines were highlighted at the Financial Technologies Middle East (FTME) roundtable conference for Risk Managers entitled 'Basel II and Beyond'.
The challenge is magnified due to the lack of credible, quality and granular data.
Feedback from senior risk managers of UAE banks revealed that the majority of the banks may need more than six months to be compliant with the guidelines of the Basel II accord.
Commenting on the progress of the compliance effort, FTME Director Arshad Khan said: "Banks in the UAE are very well conversed with the benefits that Basel II compli ance will bring for them. That's the reason that even though they are facing several challenges, sincere efforts are still being put in with a view to become compliant in the near future.
"Compliance with these norms helps banks in emerging economies to prepare themselves for global competition and adopt best international practices, particularly in risk management." "Basel II compliance mitigates various risks that any bank is exposed to. Mitigation of such kind of risks is an important part of their overall risk assessment program.
"In the absence of proper information management framework, banks in emerging economies do not have the required risk profile of their borrowers. Availability of such detailed data can be used to price various banking products differentially to customers," AK Nag, Chief Consultancy Officer of Riskraft, a knowledge initiative of Financial Technologies said.
The roundtable conference was concluded with a sum mation that globalisation of UAE's financial sector is a reality and its banks must subject themselves to global standards and disciplines to remain competitive.
Adoption of the risk intelligence system provided under the Basel II norms not only leads to better and prompt compliance but also increases efficiency and productivity of the banks.
Its implementation is seen as essential for domestic banks in emerging economies to maintain their independence.
FTME is a leading technology enterprise that delivers Straight Through Processing (STP) solutions such as technology licensing, business process outsourcing and domain consulting for financial services industry, exchanges, brokers, banks and financial institutions.
In a joint venture with Dubai Multi Commodities Centre, Financial Technologies has set up Dubai Gold and Commodities Exchange, the Middle East's first commodities and currencies derivatives exchange.
© Emirates Today 2007
