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Basel III and Its ConsequencesConfronting a New Regulatory Environment
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Recent fiscal crises demonstrated
numerous weaknesses in the globalregulatory framework and in banksrisk management practices. As a result,regulatory authorities have discussedseveral new measures to increase thestability of the financial markets. Onecentral focus is strengthening globalcapital and liquidity rules (Basel III)with the goal of improving the bankingsectors ability to absorb shocks arisingfrom financial and economic stress[Source: Basel Committee on BankingSupervision (Dec. 2010) - Basel III: A
global regulatory framework for moreresilient banks and banking systems].
Basel III introduces several newor enhanced rules, including theintroduction of a new and stricterdefinition of capital designed toincrease quality, consistency andtransparency of the capital base andthe introduction of a global liquiditystandard. The two new liquidity ratios the short-term Liquidity CoverageRatio (LCR) and the longer-term Net
Stable Funding Ratio (NSFR) speakto the need for banks to increasetheir high-quality liquid assets and
obtain more stable sources of funding,
while requiring they adhere to soundprinciples of liquidity risk management.Basel III also imposes a new leverageratio, a supplement to the risk-basedBasel II framework. By setting 3percent as the ratio of Tier 1Capital to total exposure, the newleverage ratio may limit banks scopeof action.
Moreover Basel III increases capitalrequirements for counterpartycredit risk arising from derivatives,
repurchase agreements (repos)and securities financing activities.The new framework also containsmeasures addressing the reductionof the cyclical effects of Basel II, aswell as the reduction of systemic risk.For instance, it introduces a capitalconservation and countercyclicalcapital buffer, and discusses through-the-cycle provisioning [Sources: BaselCommittee on Banking Supervision(Dec. 2010) - Basel III: A globalregulatory framework for more
resilient banks and banking systemsand Basel Committee on BankingSupervision (Dec. 2010) - Basel III:
International framework for liquidity
risk measurement, standards andmonitoring]. Basel IIIs approach tosystematically important financialinstitutions (SIFIs) has not yetbeen finalized, but may include acombination of capital surcharges,contingent capital and bail-in debt.1
Another Basel III element underdiscussion is the so-called singlerule book, i.e. the creation of alevel playing field and the removalof discretionary rule-making at thenational level.
The new regulations will increasecapital requirements and drive upcapital as well as liquidity costs andthus increase pressure on banksprofitability.
Introduction
1Currently there is no classification of SIFIs.
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Basel III elements Key aspects
Regulatory Capital Raising quality, consistency and transparency of the capital base
Predominant form of Tier 1 Capital must be common shares and retained earnings(common equity Tier 1, [CET1])
Deductions have been harmonized and generally applied at the level of CET1
Tier 2 Capital instruments will be harmonized
Tier 3 Capital instruments will be eliminated
Risk Coverage Raising capital requirements for the trading book and complex securitizations
Capital requirement for counterparty credit risk (CCR) based on stressed inputs
Capital charge for potential mark-to-market losses (credit valuation adjustment, [CVA])
Raising counterparty credit risk management standards (e.g. wrong way risk)
Strengthening standards for collateral management and initial margining
Establishing strong standards for central counterparties (CCP)
Leverage Ratio Introducing leverage ratio as a supplementary measure to the risk-based Basel IIframework
Procyclicality Dampening cyclicality of the minimum requirements (e.g. through-the-cycleparameters)*
Promoting stronger forward looking provisioning (expected loss approach)*
Introducing capital conservation buffer
Introducing countercyclical buffer
Addressing systemic risk and interconnectedness (e.g. capital surcharge for SIFIs)*
Liquidity Standard Introducing liquidity coverage ratio (LCR)
Introducing net stable funding ratio (NSFR)
Introducing common set of monitoring tools
* Discussions on final requirements are ongoing.
Basel III elements and key aspects
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According to the current consultation
paper [Sources: Basel Committeeon Banking Supervision (Dec. 2010)- Basel III: A global regulatoryframework for more resilientbanks and banking systems andBasel Committee on BankingSupervision (Dec. 2010) - Basel III:International framework for liquidityrisk measurement, standards andmonitoring] the new rules will comeinto force January 1, 2013, therebydifferent phase-in arrangementshave been agreed to (see Figure 1).Although some Basel III requirementswill be introduced at a later stage,with full implementation by 2019[Sources: Basel Committee on BankingSupervision (Dec. 2010) - Basel III:A global regulatory framework formore resilient banks and bankingsystems and Basel Committee onBanking Supervision (Dec. 2010) -Basel III: International framework forliquidity risk measurement, standardsand monitoring], banks should deal
actively with the new regulationsnow. Large banks are already taking
actions such as issuance of capital
under consideration of the neweligibility criteria or adjusting theirfunding strategy, to comply withBasel III. The market expects banksto comply with Basel III before theregulatory timeline pushing them toa faster implementation. In addition,the observation periods require banksto be able to calculate their newratios before the introduction date[Sources: Basel Committee on BankingSupervision (Dec. 2010) - Basel III: Aglobal regulatory framework for moreresilient banks and banking systemsand Basel Committee on BankingSupervision (Dec. 2010) - Basel III:International framework for liquidityrisk measurement, standards andmonitoring].
The implementation as well as thetimeline of the new regulationswill vary from region to region. Forinstance in Switzerland the authoritieshave defined additional capital
requirements beyond the base asdefined in Basel III (Swiss Finish).In the European Union (EU), Basel III
will be implemented with the Capital
Requirements Directive IV (CRD IV)which should be published by theEuropean Commission in June orJuly 2011. While the political processis quite advanced in the EU, someaspects of Basel III need furtherdiscussion, such as the definition ofhigh-quality liquid assets. Othertopics will be tested during theobservation periods.
Also in discussion is whether someelements of Basel III should be
implemented directly through an EURegulation without any adjustmentby the national authorities. Finally,it should be noted that severalamendments to the capital frameworkhave already been implementedthrough the CRD II and CRD III (e.g. inthe area of securitization or in hybridcapital instruments).
Timeline
Figure 1: Phase-in arrangements [Sources: Basel Committee on Banking Supervision (Dec. 2010) - Basel III: A globalregulatory framework for more resilient banks and banking systems and Accenture Risk Management]
3.5%
3.5%
4.5%
8.0%
8.0%
4.0% 4.5%
4.0% 4.5%
20% 40%
5.5% 6.0%
8.0% 8.0%
8.0% 8.0%
4.5%
2.5%
7.0%
100%
6.0%
8.0%
10.5%
4.5%
1.875%
6.375%
100%
6.0%
8.0%
9.875%
4.5%
1.25%
5.75%
80%
6.0%
8.0%
9.125%
4.5%
0.625%
5.125%
60%
6.0%
8.0%
8.625%
2013 2014 2015 2016 2017 2018 as of 2019Capital
Introduction LCR and NSFR* LCR NSFR
Introduction Leverage Ratio LeverageRatio**
Min. Core Tier 1 Capital Ratio (% of RWA)
Capital Conservation Buffer (% of RWA)
Min. Core Tier 1 plus Capital Conservation Buffer(% of RWA)
Phase-in of deductions from Core Tier 1
Min. Tier 1 Capital (% of RWA)
Min. Total Capital (% of RWA)
Min. Total Capital plus Capital Conservation Buffer(% of RWA)
Countercyclical Buffer
Capital instruments that no longer qualify as
Non-Core Tier 1 Capital or Tier 2 Capital
Phased out over 10 year horizon beginning 2013 (reduction of 10% per year)
Range between 0-2.5% (common equity or other fully loss absorbing capital)
Leverage Ratio
Liquidity Standard
Note: Orange numbers indicate transition periods and all dates are as of January 1st.
* Reporting to supervisory authorities is expected by January 1, 2012 for both.** January 1, 2013 to January 1, 2017 parallel run period.
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Challenges Banks Have To Face
Figure 2: Impact of Basel III on the calculation of the Capital Ratio [Source: Accenture Risk Management]
Non-core Tier 1 Capital
Core Tier 1 Capital
Increased capital requirements
Required capital ratio =Capital(according to new definition)
RWA(Credit-, Market-, Operational Risk)
Increased RWAs
Higher risk weights for (re-)securitizations
Higher capital requirements for tradingbook positions (Stressed-VaR, IncrementalRisk Charge)
Higher capital requirements for counterpartycredit risk exposures arising from derivatives,repo-style transactions and securities financingactivities (CVA risk, Wrong Way risk)
Stricter capital definition
Increased quality of Tier 1 Capital (goingconcern)
Simplification and reduction of Tier 2Capital (gone concern)
Elimination of Tier 3 Capital
New eligibility criteria and limits for capitalcomponents
Countercyclical Buff er
Capital Conservation BufferTier 2 Capital
2.0%3.5% 4.0%
4.5% 4.5% 4.5% 4.5% 4.5%2.0%
1.0%1.5%
1.5% 1.5% 1.5% 1.5% 1.5%4.0% 3.5%
2.5% 2.0% 2.0% 2.0% 2.0% 2.0%
0.6% 1.3% 1.9% 2.5%
-2012 2013 2014 2015 2016 2017 2018 2019
0-2.5%
Basel III requires better capital endowment and simultaneously results in higher RWAs
Basel III will undoubtedly hit banks
hard through its range of new andstricter regulations, whether becauseof higher capital requirements, thenew liquidity standard, the increasedrisk coverage, the new leverage ratioor a combination of the differentrequirements. The aggregate effectof the requirements both those thatare imminent and those that are stillin discussion will vary from bank tobank, and among large banks almostall will have to deal with its far-reaching implications.
Taking a closer look at the changesin the capital requirements, we seea number of negative effects whoseinterplay can stress banks capital basesignificantly. On the one hand thestricter capital definition lowers banksavailable capital. At the same timethe risk weighted assets (RWA) forsecuritizations, trading book positionsand certain counterparty credit riskexposures are significantly increased.
Both effects decrease banks realizedcapital ratios enormously. On the
other hand the required capital ratio
is increased over the next few yearstill 2019 (see Figure 2). These twocounterbalancing effects will posea major problem for some banks tomeet the required capital ratio, makingcorresponding measures inevitable.
This major impact can also beseen in the latest QuantitativeImpact Study (QIS) published bythe Basel Committee on BankingSupervision (BCBS) in December2010. One important result is that a
full implementation of the Basel IIIpackage would lead to a reductionof CET 1 Capital by more than 40percent, creating a shortfall of 577billion Euros for the 91 Group 1 banks[Source: Basel Committee on BankingSupervision (Dec. 2010) : Resultsof the comprehensive quantitativeimpact study] i.e., those participantsof the study that have Tier 1 Capitalin excess of 3 billion Euros; are welldiversified; and are internationally
active. The expected decline in CET1 Capital is attributable primarily to
reductions in the goodwill that banks
can carry on their balance sheet andthe deduction of deferred tax assets[Source: Basel Committee on BankingSupervision (Dec. 2010) : Results ofthe comprehensive quantitative impactstudy]. At the same time the Group 1banks overall RWA would increase by23 percent, mainly due to increasedcapital charges for counterparty creditrisk (CCR) and trading book exposures[Source: Basel Committee on BankingSupervision (Dec. 2010) : Results ofthe comprehensive quantitative impactstudy].
In addition to the stricter capitalrequirements, the introduction ofthe LCR and NSFR will force banksto rethink their liquidity position,and potentially require banks toincrease their stock of high-qualityliquid assets and to use more stablesources of funding. Again the BCBS-QIS documents an urgent need for adramatic change in banks liquidity
management. Large banks currentlyhave an average LCR of 83 percent,
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2Since January 1, 2011 the CEBS has been replaced by the European Banking Authority (EBA) due to the new European financial supervisory framework.
Note: Basel III reform requires a LCR 100% and a NSFR > 100%.
whereas the EU-QIS conducted by
the Committee of European BankingSupervisors (CEBS)2in December2010 shows an even lower ratio of67 percent [Source: Committee ofEuropean Banking Supervisors (Dec.2010): Results of the comprehensivequantitative impact study]. For theNSFR, the results are slightly less severebut would still make correspondingmeasures necessary, with an averageNSFR for large banks of 93 percentin the BCBS-QIS and 91 percent inthe EU-QIS [Source: Committee ofEuropean Banking Supervisors (Dec.2010): Results of the comprehensivequantitative impact study].
Basel III also introduces a non-riskbased leverage ratio of 3 percent.According to the BCBS-QIS, asignificant subset of Group 1 banksfailed to meet this requirement. Whilethe average leverage ratio of Group 1banks is 2.8 percent, there aresignificant variations within this group.
Obviously, the implications of the newBasel III leverage ratio depend on the
specific situation of each institution.
The EU-QIS shows an even lowerleverage ratio of 2.5 percent for largeinstitutions, leading inevitably eitherto a capital issuance, a reduction ofexposures, or a combination of both.
The potential impact of Basel III onthe banking system is significant, sobanks need to think these challengesthrough carefully in 2011. Thisimpact will vary from institutionto institution, depending upon thelines of business in which the bank is
active and the geographic region inwhich it does business. Neverthelessit is foreseeable that, in particular,banks with an increased exposurein trading positions, a significantsecuritization portfolio and largeractivities in derivatives, repo-styletransactions and securities financingactivities will suffer more than others.Due to new limits and increased assetvalue correlations within the newCCR framework, the overall interbank
business will be penalized as well.
Furthermore, there will be higher
regulatory costs for banks dueto ongoing changes in regulatoryrequirements, which can be quitemeaningful depending upon the sizeof the bank and the complexity of itsbusiness. The Basel III landscape ischanging rapidly, with new regulationsand requirements published by thecorresponding national authoritiesalmost every week; merely keeping upposes a strain on bank resources.
Generally, banks will experience
increased pressure on their Return onEquity (RoE) due to increased capitaland liquidity costs, which along withincreased RWAs will put pressureon margins across all segments. Inorder to become compliant with thedifferent new Basel III requirementsand, at the same time, to restore theprofitability of their businesses, bankshave a variety of potential measuresthey can take.
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How Banks Might Respond
The impact of Basel III on banks calls
for concentrated and reasoned actions.Apart from just attaining compliancewith the new regulations, banks especially those with high internalstandards and demands will gobeyond compliance and take measuresto restore profitability. Banks willassess their lines of business, levels ofrisk profiles and capital endowmentsas well as their funding strategiesto take the right steps towardscompliance and increased profitability.Numerous actions with differentduration and range are available toachieve these objectives.
Operational Responses
Basel III creates incentives for banksto improve their operating processes not only to meet requirements butto increase efficiency and lower costs.Banks have already begun to examineareas such as:
RWA optimization, including modelrefinement, process improvement,enhancement of data quality, andframework alignment
Reducing credit exposure and
potential credit losses throughstricter credit approval processesand, potentially, through lowerlimits, especially in regard to bankexposures
Improving liquidity risk managementprocesses including stress testingand development of contingencyfunding plans
Fostering closer integration of riskand finance functions
Integrating all subsidiaries throughconsistent, group-wide risk andcapital management standards
Tactical Responses
Besides the rather short-termoperational responses banks have anumber of more far-reaching tacticalactions they can take to respond,especially to profitability concerns. Wesee the focus of tactical responses on
the areas of pricing, funding and assetrestructuring. While tactical responsesby definition do not address long-term strategic issues, they may be
extremely helpful in relieving pressure
on profitability.
Among tactical responses available tobanks are:
Adjusting lending rates, dependingon competition within the specificsegments and each segmentsstrategic importance for the bank
Reflecting higher capital andliquidity costs through more risk-sensitive pricing and performance
measurement
Shifting to higher-value clients withregard to profitability
Shifting to less risky segments in theportfolio, with fewer securitizations,lower trading book exposures andreduced activities in areas such asderivatives, repos and securitiesfinancing
Increasing the level of high-quality
liquid assets
Changing the mix of funding andliquidity reserves to longer-term
Figure 3: Potential responses to Basel III changes
Processes
Methods Data
Examples of operational
responses
RWA optimization
Stricter credit approval
processes
Operational responses Tactical responses
Pricing
Funding Asset restructuring
Examples of tactical
responses
Risk-sensitive pricing
Shift to longer-term funding
Reduction of securitization
exposures
Strategic responses
Business model
Group organization Equity
Examples of strategic
responses
Sale of business unit
Change of holding structure
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funding, for instance by replacing
interbank funding with longer-termdebt and increasing the maturity ofdeposits
Reducing total exposure, both on-and-off-balance-sheet, with regardto risk and profitability
Strategic Responses
In reviewing their strategic responsesto Basel III and to the dangers ofreduced profitability, banks have the
opportunity to effect major changesthroughout all areas of the institution.These include fairly straightforwardinitiatives such as retaining earningsto increase Tier 1 Capital but alsoencompass a broad range of far-reaching possibilities including:
Issuing new capital in light of thenew eligibility criteria and phase-inarrangements
Changing liquidity risk and funding
strategy
Taking a more active approach tobalance sheet management
Engaging in more active client
management, for instance byadjusting client segmentation anddevoting more or fewer resourcesto clients at specific levels of size orprofitability
Undertaking strategic costreductions, including rationalizationof branch structures, productrationalization or implementation ofa shared services model
Changing the business model,
which may entail selling high-risk business units, entering newproduct segments or businesses, oroutsourcing or off-shoring non-corefunctions
Changing the group structure, forexample by selling off minorityinterests in financial institutions
No matter what actions banks take toreach compliance with Basel III and torestore profitability, all actions shouldbe harmonized to create an efficientapproach and achieve the best possibleresults.
Accenture believes that, in the
final analysis, even the most well-capitalized and managed banks willexperience lower profitability in thepost-Basel III environment despite therange of possible responses.
Figure 4: How to rebuild RoE post crisis
Accenture has analyzed the impact of the financial crisis on an exemplary banks RoE and the ways to rebuild profitability
26%
-5%
-6%
-6%
-2%
-3%
1%1%
3%
5%1-5%
4%
15+%
To be
estimated on
a case by
case basis
HighperformerRoE2007-2009
Highercapitalratio
De-leveraging
Highercost offunding
Reducedfee income
NPLprovisionincrease
Post crisisbasis case
Pricingoptimiza-tion
Effectiveriskmanage-ment
Effectivecustomermanage-ment
Strategiccostreduction
Inorganicgrowth
Post crisisstrategicoptions
Source: Accenture Research; In bold, levers used to quantify impact on RoE
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Potential Challenges of Basel IIIImplementation
Basel III, with its comprehensive
requirements, forces banks to takea number of actions to meet thevarious new regulatory ratios andto restore, at least partially, theirprofitability. Before undertakingsuch actions, banks must be able tocalculate and report the new ratios,requiring a huge implementationeffort . Since Basel III covers a largenumber of areas, a thorough reviewof respective data and IT architecture,risk methodologies, governancestructure, reporting systems, as wellas the corresponding processes isneeded to accomplish a successfulimplementation. Banks should befully aware of these challenges asearly as possible before startingtheir Basel III implementation. Toget a better picture of the potentialpitfalls we have categorized theissues as functional, technical andorganizational implementationchallenges (see Figure 5).
The functional challenges includedeveloping specifications for the newregulatory requirements, such as themapping of positions (assets and
liabilities) to the new liquidity and
funding categories in the LCR andNSFR calculation as well as to thestricter defined capital categories.Within the LCR the stress testingmethodologies need to be specifiedtaking into account the characteristicsof the bank. Further functionalchallenges refer to the specificationof the new requirements for tradingbook positions and within the CCRframework (e.g. CVA) as well asadjustments of the limit systems withregard to the new capital and liquidityratios. Crucial is the integration of newregulatory requirements into existingcapital and risk management as somemeasures to improve new ratios (e.g.liquidity ratios) might have a negativeeffect on existing figures.
The technical challenges of BaselIII implementation includes dataavailability, data completeness,data quality and data consistencyto calculate the new ratios. Our
experience indicates that in somecases highlighting data availability asthe key criteria for calculating liquidityratios and analyzing the completeness
of the data in the different enterprise
systems and data pools can bebeneficial. Further technical challengesresult from the adjustments of thefinancial reporting system with regardto the new ratios and the creation ofeffective interfaces with the existingrisk management systems.
Compared to Basel II with its majorfocus on credit and operational risks,the Basel III requirements cover awider range of topic areas includingthe banks capital, liquidity and risk
management. In Accentures view,the key to a successful Basel IIIimplementation is to set-up a BaselIII project team that will consider thedependencies between the differenttopic areas and that will coordinatethe different functional, technicaland operating units and departmentssuch as risk and finance as well asIT and business departments. Closecooperation will be inevitable tokeep implementation costs down
while providing necessary resourcesfor compliance and for subsequentefforts to rebuild profitability. Theseorganizationalchallenges need to
Figure 5: Functional, technical and organizational challenges of Basel III implementation
Organizational
Functio
nal
Tech
nica
l
Technical implementation ofnew regulatory requirements
Data availability and quality
Technical integration intoexisting risk managementsystems (e.g. interfaces)
Functional specification ofnew regulatory requirements(e.g. stress testing, limitsystem, riskquantification)
Functional integration ofnew regulatory requirementsinto existing capital and riskmanagement
Coordination of different units as well as withinthe group
Responsibilities within implementation andbeyond
Availability of resources
Implementationchallenges of
Basel III
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be managed to develop a group-
wide response and also includethe assignment of responsibilities both within the framework ofimplementation, and beyond intoefforts to rebuild profitability andto allow for an integrated capital,liquidity and risk management. Toachieve these objectives, identificationand securing of the resources must beconducted to accomplish the full rangeof required initiatives.
Banks that deal with Basel III effectively
will establish a transparent, structuredorganization with clear responsibilitiesat all levels, with comprehensivegovernance for newly created models,processes, and data. They willmake available sufficient resourcesthroughout the implementation toallow for a concerted and efficientexecution, and will, if necessary, createnew functions to deal with matterssuch as asset disposal.
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How Accenture Can Help
The demands and challenges of the
Basel III implementation are bothnumerous and complex, and call foran efficient and structured approachto mitigate the impact of Basel III. Inworking with banking clients on theirresponse to the Basel III requirementsacross the globe, Accenture usesa proven and target-oriented three-stage approach along with our rosterof dedicated tools. Our approach ismodular, flexible and scalable and takesinto account the specific context ofeach client. It allows not only for an
efficient Basel III implementation butalso initiates appropriate measures tomitigate the negative effects of Basel IIIon the bank.
The first stage is devoted to ananalysis of the banks current situationand to help identify the scale andfocus of the project. Accenture hasdeveloped a proprietary Basel IIIDiagnostic Tool with a modular set-upto help identify actions necessary tomeet the requirements the bank has
defined for satisfying the regulationsdetailed in CRD II through IV, withthe tool providing an efficient andeffective gap analysis (see Figure 6).
In the second stage, with deviations
from Basel III identified, thebank establishes priorities forimmediate action while planningfor implementation. The planningprocess takes the banks specificcharacteristics, as well as its ownstrategic priorities, into consideration.This stage also involves estimating thetotal Basel III implementation effortand uses business cases to verifythe measures needed in a detailedimplementation plan (see Figure 6).
Stage one and two together build theBasel III preliminary review which istarget-oriented and can be conductedwith the help of our dedicated BaselIII Diagnostic Tool within a few weeks,depending on the size and complexityof the banks business.
During the third stage, the plan isimplemented, with project planningtools used to identify and correctdeviations from the project plan.
With Accentures help the Basel IIIimplementation can be effectivelyconducted by a dedicated team offunctional and technical personnel
with extensive project management
experience in the risk and bankingarea, using our proven projectmanagement tools (see Figure 6).
Depending upon the results ofthe gap analysis, the overall BaselIII implementation could takeapproximately two years (subjectto the size and complexity of thebank, its current situation and ITarchitecture), from commencementof the preliminary review throughproject set-up and design,
development of functional concepts,and IT implementation of necessarycomponents for Basel III. Built intothe process are regular reports onrisk and issue management as well asprogress tracking and status reporting.Accenture can support banks intheir efforts to address the changesrequired by Basel III as well as toundertake measures to mitigate theadverse effects of Basel III.
Figure 6: Accentures Basel III approach
Our Basel Risk Management approach is modular, flexible and scalable and takes into account the specific context of each client
Stage 3: Implementation
of measures
Stage 2: Prioritization options
of action & implementation
planning
Stage 1: Gap analysis &
derivation options of action
Approach and Tools
The Accenture Delivery Method
supports the planned implementation in
terms of time, budget and quality
parameters
Project management tools, Risk and
Issue Management, Progress Tracking
and Status Reporting illustrate deviations
from the project plan and target
achievement and initiate counteractivemeasures
Long-time project management
experiencein the Basel field in functional,
technical and process-related areas
Create an implementation plan that
respects the banks priorities and focus
The Effort Estimatordelivers a resilient
estimation of the implementation effort
Based on Business Caseswe help to
validate and prioritize the measures in a
detailed implementation plan
With our project experiencewe can
analyze your initial situation quickly and
determine the project focus
Our Basel III Diagnostic Tool identifies
gaps between the banks situation and
requirements the bank has defined
regarding CRD II IV
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The new Basel III requirements expose
banks across the globe to majorchallenges regarding their capital andliquidity requirements as well as theirrisk management. The revised Basel IIIproposals were published in December2010 by the Basel Committee onBanking Supervision and will bephased in over the next couple ofyears. Identifying the necessary stepsfor compliance and developing acomprehensive plan to address theissues and concerns raised by Basel IIIare by now a significant undertakingfor most banks.
Accenture works with banks in anumber of areas to address Basel IIIissues and set priorities for thenear, mid- and longer term. Withour extensive experience acrossa wide variety of aspects of riskmanagement, and long-time projectmanagement experience in Basel-related areas including functional,technical and process-related
assignments, Accenture is well-suited to help banks chart a coursein the Basel III landscape. Accenture
brings to bear a wealth of highly
experienced professionals as well asproject management tools to assistin identifying the gaps to effectivelyimplement Basel III, address risk andissue management, progress trackingand status reporting, helping identifydeviations from the project plan,target achievements and initiatemeasures to get back on the path tocompletion.
We believe that the real challenge foraffected banks will be to build upon
the actions mandated by Basel IIIto create stronger capital and riskstructures. Banks that meet andsurpass the Basel III requirements maynot return to levels of profitabilityexperienced before the global financialcrisis of 2008 and 2009, but they willbe in position to be well-preparedfor the next crisis and achieve highperformance within their industry.
Conclusion
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Michael Auer
Michael is executive principal Accenture Risk Management, Munich,responsible for German-speakingmarkets. Michael has 18 years ofindustry and consulting experiencein financial services and riskmanagement across Europe workingwith global institutions to transformtheir business and risk capabilities.His extensive experience in riskmanagement mainly in the areas ofmarket, credit and operational risk, risk
and regulatory matters and operatingmodels helps executives and theirmultinational firms become high-performance businesses.
Georg von Pfoestl
Georg is manager Accenture RiskManagement. Based in Vienna, Georghas nearly 8 years of experience in thearea of risk management with a focuson credit and liquidity risk, regulatorymatters and Risk Weighted Assetsoptimization. With his experience asa banking inspector at the AustrianNational Bank, his pragmaticknowledge from working with regionaland international financial institutionsacross German-speaking markets
and his technical skills pertainingto Basel II and Basel III regulatoryrequirements, he guides companies ontheir journey to high performance.
Jacek Kochanowicz
Jacek is manager Accenture RiskManagement. Based in Frankfurt,Jacek has nearly 7 years of experiencein risk management across Europe, theMiddle East and South Africa wherehe worked with several regional andinternational institutions to improvetheir risk capabilities. His extensiveexperience in risk management,especially credit risk, asset and liabilitymanagement, economic capital andstress testing helps clients become
high-performance businesses.
About the Authors
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Accenture is a global managementconsulting, technology servicesand outsourcing company, withmore than 215,000 people servingclients in more than 120 countries.Combining unparalleled experience,comprehensive capabilities across allindustries and business functions,and extensive research on the worldsmost successful companies, Accenturecollaborates with clients to help thembecome high-performance businesses
and governments. The companygenerated net revenues of US$21.6billion for the fiscal year ended Aug.31, 2010. Its home page iswww.accenture.com.
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About Accenture RiskManagement
Accenture Risk Managementconsulting services works with clientsto create and implement integratedrisk management capabilities designedto gain higher economic returns,
improve shareholder value andincrease stakeholder confidence.
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