CyLawCom Compliance..A New Dimension in Banks
Amongst the various measures to be taken to strengthen the
Indian Banking system, Reserve Bank of India is reportedly contemplating
introduction of the Basel II compliance regime by 2007 albeit in a simplified
form.
The Basel II regime in simple terms means maintenance of a
Capital Adequacy Ratio (CAR) at the required level (9% for the time being) at
all times.
The key factor however is that the CAR would be based on a "Risk
Weightage System" for the assets which is a relatively more complex affair.
The Revised Framework consists of
three-mutually reinforcing Pillars, namely, minimum capital requirements,
supervisory review of capital adequacy and market discipline.
Under Pillar 1,
the Framework offers three distinct options for computing capital requirement
for credit risk and three other options for computing capital requirement for
operational risk.
These approaches for credit and operational risks are based on
increasing risk sensitivity and allow banks to select an approach that is the
most appropriate to the stage of development of bank's operations.
The
approaches available for computing capital for credit risk are Standardised
Approach, Foundation Internal Rating Based Approach and Advanced Internal Rating
Based Approach.
The approaches available for computing capital for operational
risk are Basic Indicator Approach, Standardised Approach and Advanced
Measurement Approach
After the introduction of the Sarbanes Oxely Act (SOX) in
USA, and mandatory compliance provisions, the scope of Cyber Law Compliance had
expanded substantially in the corporate world with accounting compliance
requirements for the US regime. This included many Indian entities which were
subsidiaries of the US Companies.
Now with the expansion of the accounting compliance regime in
Banks and the possible allowance of majority stake FDI in Indian Banks, the need
for SOX and Basel II Compliance to meet international standards has grown.
This changing needs of the industry has thrown a challenge to
the IT World to tune their software tools for the Banking industry as well as
other Corporates to be Cyber Law Compliant.
Naavi
February 16, 2005
Related Articles:
India to put banks under Basel regime in 2007..FE
Draft Prudential Guideliens on Capital Adequacy..RBI
Sarbanes Oxely Basics
Sarbanes Oxely Act
