Sunday, October 2, 2011

The implementation of Basel II in emerging World Part.I



The Basel II, whose implementation has been effective in all European countries or those of G10, The monetary and financial system is international and globalized; the new Basel Accord applies to countries emerging.

A necessity to stay in the international race is the reasons prompting the emerging countries to implement Basel II are due to both regulators and local financial institutions.

For local regulators, the standards required by Basel II first appear as a necessity to show the dynamics of the country and its integration into international standards. Indeed, by its demands for governance and transparency (Pillars 2 and 3 of the reform), coupled with a sophisticated risk management practices and in terms of calculations, the Basel II provides a real upgrade financial system. This new framework of risk is often seen as a catalyst that would clearly enhance the country's economic development.

For financial institutions, their membership is more common with banks based in countries where standards are in force, the implementation of Basel II is often a constraint group. Indeed, the parent companies which are subject to Basel II must deploy this device in all of their subsidiaries, in order to have a consistent view of risk borne. For local branches, Basel II will increase their competitiveness in the long term by generating an adjustment of product pricing based on risk and improving the general policy of granting credit.


In most emerging countries, the implementation of Basel II is graduated in time and specific to reflect the particularities of each country.

Friday, September 30, 2011

Outsourcing and internal control in Banking Part.II



In this context, the establishment of collective audit providers could help save time and productivity for each establishment.
This optimization of the audit activities outsourced more and more interested in the Inspection Branch of the big banks. And working groups were formed in a pooled between several banks in order to define the terms of planning, implementation and monitoring of audits of providers. The working group is considering the establishment of a governance structure, a plan of joint audit and risk mapping for the shared use of audits should be part of common control risks of each institution without failing to respect the privacy principles of each Bank.

However, to date, nothing has yet been clearly defined and different approaches are envisaged for the implementation of shared audits:

* Audits carried out by joint team delegations
* Audits shared between delegations (each delegating the responsibility of an audit)
* Audits by authorized third parties

what could be the conclusions of this working group?
The operational implementation of a system audit activities outsourced based on audits shared between the delegating or on a joint team delegations, would seem the most logical and easiest to implement. But that solution presents risks to lead to potential conflicts of interest on the conduct of audits, the findings and the implementation of action plans. Thus, differences between schools could undermine the legitimate operation of the audits. The conduct of audits by authorized third parties, outside each bank, would then appear as the preferred solution as long as you specify the responsibility of each institution's contractual terms.
But should we in this case provide auditing services of third parties mandated?
Indeed, in the case of annual monitoring of outsourced activities, external auditors could be considered as service providers intellectual Internal Control. The control activity is necessarily "essential" it therefore falls within the scope of activities to be audited!

Under these conditions, the task of the Working Group seems difficult to reach consensus on a pragmatic and operative in order not to deport the weight of outsourced activities on control functions.

Outsourcing and internal control in Banking Part.I


The use of outsourcing is a growing phenomenon that is a strategic choice for enterprises, generally guided by the objective of streamlining production costs and improve profitability. Did not escape this trend, banks are also appeal to external structures in order to give them in exchange for remuneration of non-strategic or unprofitable. For example, check processing is an activity often outsourced by the banks because it creates a significant load input and low added value.

But beware; the outsourcing of an activity does not prevent its control.
Indeed, 2007 orders involve clarifying the controls to be installed on the outsourced activities "essential." These changes are intended to ensure the principle of "no transfer of responsibility" of the Bank's external service provider. In this context, banks should review their internal control systems with a view to measuring, monitoring and control of risks related to outsourced activities. The controls must include details of:

* A guarantee of quality for normal service.
* The establishment of a plan for continuity of service by the service (commitment of recovery time).
* The protection of confidential information.

De facto, the outsourcing should result in a written contract between the provider and establishing external client. The contract shall contain a clause giving the right to regular audits and a statement of the steps taken by the continuous monitoring and periodic monitoring of outsourced activities. In view of these regulations, what are the good practices observed in the square as part of outsourced providers to common? Given the fairly concentrated market providers, banks often resort to common providers. For example include BRINKS Evolution for transporting money or Experiance to check processing draining a very large market share on their respective activities.

Banks will have to regain trust


The current financial crisis through the financial markets due to subprime write-downs but also with the announcement of an unprecedented fraud at Society General structurally alter the banking landscape and challenges acquired banks to the market, investors as well as their clients: the confidence of financial institutions.

Through the efforts of transparency, better management of their operational costs and optimizing their capital, banks have to adapt to a financial cycle that will require them to demonstrate their ability to innovate both in terms of respect new regulatory ratios in terms of cost reduction and business development. The impact of this crisis of confidence and the levers available to financial institutions to restore calm and confidence in the system should be done at the earliest.

Monday, September 26, 2011

China investors shunning banks



You could fear that may happen in Europe, but in China it is happening. According to the official press, the four largest commercial banks are Chinese investors look to other alternatives - such as individuals and private companies - to deposit their money, it pushed by high inflation and low interest rates.

According to the Zhongguo Zhengjuan Bao (Journal of China securities), deposits of the Industrial and Commercial Bank of China (ICBC), China Construction Bank (CCB), Bank of China and Agricultural Bank of China (ABC) fell by 420 billion Yuan (48.6 billion Euros) during the first 15 days of September.

The business daily also argues that much of the funds were placed on a parallel credit market. If individuals and companies are certainly not having status to bank, they nevertheless offer pay about ten times higher than bank deposits. Recall that the rise in consumer prices was 6.2% in August, while the deposit rates at one year is only 3.5%. In the end, so investors lose purchasing power by placing their money in the bank.

It should be noted also that in early September, the rating agency Fitch said it may lower the sovereign rating of China in the next two years. Reasons: the heavy debt the Chinese banking sector, the latter having provided massive loans in recent months.