AmBank group acquires Basell II operational risk management system

The Edge
03-07-2008

KUALA LUMPUR: AmBank group has appointed LIST S.p.A, Italy as its operational risk management solutions partner for the group in preparation for compliance with more advanced approach of operational risk management under Basel II and Bank Negara Malaysia requirements.

In a statement yesterday, AmBank said the operational risk management system to be acquired, OpRisk Evolution, was part of the group’s efforts to enhance the risk management practices and meet Bank Negara Malaysia’s requirement.

It will be implemented mainly for the five major entities within the AmBank group — AmBank (M) Bhd, AmInvestment Bank Bhd, AmIslamic Bank Bhd, AmInternational (L) Ltd and AmAssurance Bhd.

AmBank said it was a complete module comprising loss incident data collection, risk and control self assessment, key risk indicator, quantitative analysis for capital allocation and monitoring mechanism for senior management via the dashboard function.

It said the project cost over RM2 million for the group, inclusive of both hardware and software for the entire project implementation. The system is to be delivered in phases to the group under a nine-month project timeline.

“The selection of LIST, a leading business consultancy and software solutions provider on operational risk, demonstrates the AmBank group’s commitment to meeting global best practice in risk recognition, and risk management practices” said Charles Tan, chief information officer, AmBank group.

“One of LIST’s strong objectives has always been to enter into smart partnership programmes with our clients in consolidating resources, converging skills and sharing knowledge in operational risk management,” said Fabrice Le Calvez, sales director, LIST Group S.p.A.

Basel II is an effort by international banking supervisors to update the original international bank capital accord (Basel I), which has been in effect since 1988. The Basel Committee on Banking Supervision developed the current proposals with the aim of improving the consistency of capital regulations at an international level, make regulatory capital more risk sensitive, and promote enhanced risk-management practices among large internationally active banking organisations.

The Basel II framework consists of three pillars that seek to increase financial stability by better aligning a bank’s regulatory capital to the actual risk, by supervising this process and rewarding banks with lower risks profile.

The three pillars are:
1. Minimum Capital Requirements — specifies the determination of a bank’s capital requirements consistent with the level of risks taken.
2. Supervisory Review — a mandatory supervisory review of the methodologies and processes that a bank implements to meet the requirements specified in the 1st pillar.
3. Market Discipline — provides further support by insisting on a high degree of transparency, by obliging a bank to have a formal disclosure policy regarding its financial condition and performance.

http://www.theedgedaily.com/cms/content.jsp?id=com.tms.cms.article.Article_e7042e37-cb73c03a-c8c7d600-b831620b