The implementation of Basel II in emerging World Part.III

In Morocco for example, credit risk, what methods are "standards" that are applied in the first place, methods "advanced" being planned in a few years. This allows the market to have time to prepare for and adapt to new standards and above all to promote aspects of governance and transparency (Pillar 2 and 3) as opposed to the race for the sophisticated methods that can lead advanced.

In addition to these legislative aspects and context, the gradual implementation of the standards also allows emerging in time to cushion the financial and human investments induced by the introduction of the device (see article in Financial Services Strategies on the topic: decryption and impact of Basel / IAS in Morocco). These investments are mainly of two kinds: information systems and organizational. Indeed, the Basel standards require a quasi-systematic evolution of strong information systems and the integration of a computing device and archiving of data and specific parameters. This results in high costs, even in many cases, a software market, whose development costs were shared.
For banks, Basel II is also an opportunity to renovate related functions, such as ALM, the practices of lending and risk treatment (recovery), the mechanisms of funding or administration of reference ( especially the third).

The implementation of Basel II also leads to organizational and human costs. Indeed, banks are obliged to proceed with the scalability, and in some cases, the formation of teams in charge of the management, control and risk modeling. In addition, to be fully effective, reform requires awareness (through training) of all stakeholders, including the Directorate General (requirement of Pillar 2), in the process of the bank of grant reporting regulations.

The adoption of Basel II prudential standards, therefore, a virtuous cycle leads to multiple benefits for countries implementing them: this process can be slow in some areas, but it is inexorable to comply with international standards.

The implementation of Basel II in emerging World Part.II

Implementation is necessary for local regulators to enable them:

* To learn from established and that have taken place earlier in other countries.
Indeed, in order to receive feedback from the actors in countries that have already adopted the reform, the emerging countries have established processes for discussion and exchange that lasted several years for some of them ( for example, the Moroccan regulator has consulted for 3 years before the French players to transpose the Basel standards in its regulation).
* To prepare their local regulations to the requirements of the new standards.
To be effective Basel standards require an adequate regulatory environment and thus prepared. The legislature must provide for such an expansion of the prerogatives of local regulatory authorities through the adoption of a number of laws to modernize bank.
* Adapt the Basel standards to the country context, particularly in terms of two parameters: the diversity of financial activity in this country and the level of detail and sophistication of available information.
On adaptation to local conditions, for example it is useless to try to apply the same level of sophistication of the Basel requirements for market risk (modeling) in a country where 99% of the activity is commercial banking (loans, current accounts ....).
Also, try to impose a strict segmentation of customers through the turnover (which is required in the regulations) is not always possible in some emerging markets given the low quality of available information or thresholds turnover that does not correspond to G10.

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.

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.