Resources for Basel II Capital Accord (Basel II)

OSFI chief outlines challenges banks faced moving to Basel II

investmentexecutive.com

Julie Dickson, Superintendent of Financial Institutions, today discussed the challenges banks faced in moving to risk-based capital adequacy requirements, and warned that the same troubles likely face insurers.

Speaking to the KPMG Insurance Issues Conference in Toronto, Dickson noted that the insurance industry is also seeking its own version of the global banks’ capital adequacy system, known as Basel II. And, she suggested that they will likely also face exactly the same challenges as the banks did.

She detailed 10 notable challenges, including: the unanticipated effort required to adopt leading edge of risk management practices; costs were far higher than expected; data availability, accessibility and integrity was also an issue; adopting advanced capital approaches in countries with far-flung operations is a huge challenge; as was producing reasonable risk estimates to support a capital measurement.

Also, she notes that explaining it all to senior management and directors was not easy. There was confusion about the ultimate goal. And, there is a steep learning curve for analysts as well as for the institutions that implement the advanced approaches, requiring greater disclosure.

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