The Implications of Implementing Basel II for Operational Risk - Research Proposal Example

Research Proposal Introduction Nowadays, the laws laid by 1988 Basel Capital Accord are functional in over hundred nations, having assumed the responsibility of an international standard with the passage of time. Basel II (Akkizidis, pp. 25-44) is the accord intended to substitute it and is a lot more multifaceted. In fact, it is so multifaceted that difficulties caused because of its execution have been a center of attention of attention during the lengthy procedure. More or less sixteen years later, on 26 June 2004 (Panjer, pp. 71-78), the BCBS sanctioned the publication of the “International Convergence of Capital Measurement and Capital Standards: a Revised Framework”, which is the Basel II framework (BCBS, pp. 1). Its key purpose is to get constancy as well as reliability in the directive of the capital competence of globally functional banks (BCBS, pp. 1). Basel II summarizes the facts for applying the risk-responsive minimum capital prerequisites for banking institutions as well as emphasizes by setting the standards for evaluation by banking institutions along with managers for their capital competence to cover their risks (BCBS, pp. 1). Particularly, this study rotates around various features of Basel II as spotlighting on rising African nations for Basel II. Aims and Objectives Aims and Objectives are the key factor of any study, because they guarantee attainment of helpful results, while, lack of objectives frequently give rise to depletion of tries of researchers. From this perceptive, the researcher has provided noteworthy significance to the classification of aims, and hence, the prime function of the planned research will be focus on the rising African financial systems for the execution of Basel II for set risk. The fundamental purpose of this research is to carry out a comparative study on the execution of the latest capital agreement in African emerging nations about the qualitative, as well as quantitative execution concerns. In specific, this study will take account of the scope of and agendas for execution, phases of an improvement in execution, cut-off dates, the tests dealt by the banking institutions along with the managers, funds competence ratios along with the balance sheet arrangement in terms of the forms of bank loan. In addition, the recommended study will take account of attempts of classifying rising financial systems within the African continent that are prepared for the execution of Basel II. Second objective of the research is to draw examples as well as conclusions by study of other nation’s understanding in the execution procedure of the fresh deal in African nation. This is for the reason that the African nations in this research are on various points of the execution phases, not to various points of fiscal growth. In this regard, this research paper tries to recognize advices not just for South Africa, but other emergent and rising financial systems in the African continent these new set of laws are likely to influence and every manager utilize them internationally. Research Statement In this manner, the researcher will pay attention on the following research statement to carry out the aims and objectives of the study: “To acquire implications of implementing Basel II for operational risk in emerging African countries” Literature Review The global banking situation has turn out to be probability riskier for the reason that the current progresses in economic services as well as products, which have altered the method banks, carry out their routine business. The fast rapid incorporation of international marketplaces has presented the requirement to get economic strength by means of the acceptance of universal policy of regulating the worldwide economic system (IT Governance Institute, pp. 20-44). In order to get the steadiness in international banking region, capital directive is used. Many nations have initiated to apply the new funds competence regulations (Basel II) following the international accord between central bankers that bank’s funds levels are supposed to be synchronized to improve worldwide economic constancy. In this research, means of the comparative study of the common execution concerns that rising nations affect all Basel II regulations consistently across each banking institution that function in their region. Developed nations use these regulations merely to large and globally dynamic banks, and because of the variety of their banking industries, they as well affect locally customized regulations to the locally based banks. For the flourishing execution of Basel II, appropriate arrangement, devoting bank funds, and creating essential governmental adjustments are conditions for including Basel II into the authoritarian framework for any nation (Jobst, pp. 44-59). The research declares that the existing international financial mayhem carries on posing a warning to the success of the Basel II regulations, which intended at attaining international financial steadiness (Moosa, pp. 21-27). Basel II is useful for every bank in both G10 and non-G10 nations, for the reason that it offers a menu of advancements appropriate for both refined and least refined banks (Mboweni, pp. 6). Its fundamental standards smooth the progress of the arrangement of funds competence necessities to the key factors of banking risks, and in addition advance risk extent and management means of the banks. Thus, Basel II tries to handle the latest advances, as well as mechanisms in the economy because of fiscal innovations. By means of appropriate execution, the new capital deal has the prospective of improving risk administration in banks as well as supporting financial resources more strongly with regulatory investment (Chorafas, pp. 64-69). For the flourishing execution of Basel II, entire collaboration between banks and managers, between managers of various nations and between various banks is extremely significant. In South Africa, banks are synchronized by the Banking Supervision Department (BSD) of the South African Reserve Bank (SARB) appropriate to the standards laid down by the BCBS (Chorafas, pp. 41-47). This guarantees that South African banks act in accordance with the worldwide sound practices to uphold a complicated banking structure to the community (Mboweni, pp. 1-9). South Africa has turned out to be a significant monetary centre, well situated to offer international services by the worldwide offices of its banks as well as the existence of worldwide banks. This offers the good reason for the requirement for Basel II to be included within the authoritarian arrangement of South Africa, as well as other nations (Gregoriou, pp. 12-22). Provided the special phases of Basel II execution internationally and apprehensions on its impact on the banking scheme, there is need for research on the execution concerns in various nations to get various lessons for South Africa and other nations, executing or yet to execute it (Glantz, pp. 39-46). Most important execution concerns take account of; the level of and agendas for execution, disputes faced by banks as well as nationwide managers, banking infrastructure, and impact on bank loan as well as credit development. A comparative research is consequently compulsory to investigate the different concerns around the execution of the latest deal in various nations (Chemobai & Fabozzi, pp. 40-45). This could expose the knowledge of the nation before and through Basel II execution. It is thus applicable that a diverse vision and approach be started to find out the impact of Basel II in South Africa. Jacobsohn (pp. 23-25) investigated the consequence of Basel II on the South African banking system because of potential alterations in the method in which a bank’s industry will be carried out. The research focused on the impact of pillar 1 and did not protect the impacts of pillars two and three (Scott, pp. 88-92). His study declared that large South African banks would turn out to be takeover objects as a result of their huge experiences within the trade and finance marketplaces owing to deepened struggle. Banks will modify the approach by they carry out their business because of the execution of Basel II. Cumming and Nel (pp. 654-655) carried out an opening appraisal of the expected outcomes of the latest deal for South African banks. The most important preliminary result of this research was that the South African banking region had transferred towards low risk investments over the period and the execution of Basel II would maybe boost the credit lines to savings ranking borrowers (Cumming and Nel, pp. 655). The main prominent trait of these studies is that they were carries out ahead of the complete execution of the new deal. The results are founded on the supposed impacts of such achievement on the South African banking region. Besides, to these studies, a relative study is practicable for the reason that nations have dissimilar state of affairs in terms of magnitudes of banking business, authoritarian and managerial surroundings. The subsequent division emphasizes on the objectives of this research. Methodology In addition to recognizing the purpose statement of the study, methodology is a significant and key part of the study that has a primary part in choosing the triumph or collapse of the researcher. In this manner, methodology have a considerable place in this research, as researcher has put huge attempts to opt for most successful methodology for the recommended research, with the intention of guaranteeing helpful results at the end. Specially, secondary research methodology will be foundation of the planned research that will let the researcher to examine and observe a vast collection of books, editorials, journals, and so on that will offer different hypothetical perceptive associated to the Basel II and its execution in the African continent. At the same time as deciding the methodology, it is scrutiny that different economists, business professionals, and associations have done research connected to the Basel II and rising African nations will be extremely advantageous for the researcher to recognize associated matter for the research. Additionally, other than records, internet is the most ingenious stage for the attainment of enormous quantity of material on any subject matter, and as a result, the researcher will take benefit of the internet throughout the research. In particular, different nations have currently presented their compilation of books and magazine editorials in electronic systems that will be a noteworthy aspect in lessening the procedure of research. This is among the most important motives to highlight the exploitation of secondary research method mainly throughout the proposed research. However, there are a few constraints in the secondary method that will form intricacies and concerns in case if the research will just rely on this technique. Such as, concise evaluation of the matter has specified that even though there is a vast amount of matter on the Basel II execution, nonetheless, none offer the material that accurately relays with the acknowledged research statement. From this underlying principle, it will be indispensable for the researcher to make use of the primary methodology additionally that will offer a significant point of view to the research, and will be extremely advantageous in attainment of requisite data. Particularly, the planned research will exercise the apparatus of case studies to bring together information from a particular African marketplace, frequently South African banking region that will be extremely competent in scrutinizing the function of Basel II and potential of its execution in region. For realizing the fundamental ideology of Basel II as well as the important concerns around its execution in South Africa and other African nations, a comprehensive literature review will put together a firm groundwork for this research. The literature study will look for explanations, explanations, and interrelationships, point of views, standards, methodologies, and earlier research findings on Basel II execution. This will as well take account of an evaluation of Basel II; quantitative impact studies (QIS), consultative documents (CDs), and other appropriate writing on this subject matter to acquire an insight of the execution issues. Secondary data in addition to reports of the central banks of the relevant nations will be studied to explore their development in Basel II execution in African emerging nations. For confirmation of state related data, the liable authorities in the banking rule and administration departments will be asked Conclusion In brief, the research proposal discussed different elements that will be an imperative part of the proposed research. It is anticipation that the study regarding the implementation of Basel II in emerging African nations will be very beneficial for students and professionals in the field. Works Cited Akkizidis, Ioannis S. Guide to Optimal Operational Risk & Basel-II. Auerbach Publications, 2006. BCBS. Internal Convergence of Capital Measurement and Capital Standards: A Revised Framework. Bank for International Settlements, June 2004, pp. 238. BCBS. International Convergence of Capital Measurement and Capital Standards. A Revised Framework. Bank for International Settlements, June 2006. Chemobai, Anna S., Fabozzi, Frank J. Operational Risk. John Wiley and Sons, 2007. Chorafas, Dimitris, N. Economic Capital Allocation on Basel II. Butterworth-Heinemann, 2004. Chorafas, Dimitris, N. Operational Risk control with Basel II. Butterworth-Heinemann, 2004. Cumming, S. and Nel, H. “Capital Controls and the lending Behaviour of South African Banks: Preliminary Findings on the Expected Impact of the Basel II.” South African Journal of Economics. Volume 73, Issue 4, December 2005. Glantz, Morton. The Banker’s Handbook on Credit Risk. Academic Press, 2008. Gregoriou, Greg N. Operational Risk towards Basel III. John Wiley and Sons, 2009. IT Governance Institute. IT Control Objectives for Basel II. ISACA, 2007. Jacobsohn, O. “Impact of Basel II on the South African banking system.” Magister Commercii in Business Management. Rand Afrikaans University, 2004. Jobst, Andreas. Operational Risk. International Monetary Fund, 2007. Mboweni, T, T. “The South African Banking sector: An overview of the past 10 years.” Address by Mr. TT Mboweni, Governor of the South African Reserve Bank, at the year-end cocktail function. December 14, 2004. Moosa, Imad A. Quantification of Operational Risk under Basel II. Palgrave Macmillan, 2008. Panjer, Harry H. Operational Risk. John Wiley & Sons, 2006. Scott, Hai S. Capital Adequacy beyond Basel. Oxford University Press, 2005. Read More