Academic journal article ABA Banking Journal

Keeping "Basel Fatigue" at Bay

Academic journal article ABA Banking Journal

Keeping "Basel Fatigue" at Bay

Article excerpt

The largest U.S. banks will have to embrace Basel II and all its affects.

These include the high costs of preparation and a more expansive IT budget; the need to adopt the Advanced Internal Ratings based approach; and a more disciplined, sophisticated handling of operational risk with reserves set aside for that category for the first time.

Should smaller banks also embrace Basel II? The message from one ABA convention session was probably not, or at least, not until the early adopters have paved the way and left a more visible learning curve.

In fact, high staff costs, fees from consultants, and costs associated with modeling and data collection may well price it out of the market for non-top 50 institutions.

The Basel Accord really makes the most sense for those institutions with a global presence, and non-U.S. banks for which it represents a leap frogging past antiquated practices into the 21st Century, according to Andrew Jennings, vice-president of global account management at Fair Isaac, Minneapolis.

U.S. banks are already highly regulated, pointed out co-presenter Janice Horan, Fair Isaac's director of product marketing. …

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