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FSA official slams UK banks' preparedness for Basel II

UK banks are further behind in their preparations for Basel II than the UK's Financial Services Authority expected them to be, said Ian Tower, head of the risk review department of the prudential standards division of the regulator at a London conference on September 16.

    • Ellen Leander
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“The industry starting point is not quite as advanced as one could have expected, given the debate that lead us to developing the advanced approaches of the new Basel Accord in the first place,” he said in prepared remarks at the FSA’s “Implementing the Basel Proposals in the UK” event. “Where we had hoped to compare and contrast between industry practices in the development of our own standards in areas where Basel requires it, we have found that many banks are still designing what their practices should be.”

Tower said that according to a survey the FSA conducted in 2002, 37 banks would be trying to be ready for the advanced internal ratings-based approach (A-IRB) by the Basel deadline of December 2006, while three banks were trying to be ready for the advanced measurement approach (AMA) for operational risk. However, over the ensuing months, he said that more banks have shown an interest in being ready for the AMA, while a few banks have indicated they are unlikely to be able to hit the A-IRB deadline in time.

He said that the lack of industry “best practices”, as well as a lack of sufficient data, in some areas meant that it would be more difficult for the FSA to produce guidance on the development of certain types of models, especially for specific A-IRB exposures.BaselAlert.com

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