Hizkiyahu: Banks must adopt Basel II by 2009

Basel II lays down guidelines for determining the minimum capital requirements for banks and tightens the link between credit risk and capital allocation or capital adequacy.

By SHARON WROBEL
April 5, 2007 07:35
1 minute read.

 
X

Dear Reader,
As you can imagine, more people are reading The Jerusalem Post than ever before. Nevertheless, traditional business models are no longer sustainable and high-quality publications, like ours, are being forced to look for new ways to keep going. Unlike many other news organizations, we have not put up a paywall. We want to keep our journalism open and accessible and be able to keep providing you with news and analyses from the frontlines of Israel, the Middle East and the Jewish World.

As one of our loyal readers, we ask you to be our partner.

For $5 a month you will receive access to the following:

  • A user experience almost completely free of ads
  • Access to our Premium Section
  • Content from the award-winning Jerusalem Report and our monthly magazine to learn Hebrew - Ivrit
  • A brand new ePaper featuring the daily newspaper as it appears in print in Israel

Help us grow and continue telling Israel’s story to the world.

Thank you,

Ronit Hasin-Hochman, CEO, Jerusalem Post Group
Yaakov Katz, Editor-in-Chief

UPGRADE YOUR JPOST EXPERIENCE FOR 5$ PER MONTH Show me later

Supervisor of Banks, Rony Hizkiyahu, is pushing ahead with the plan for Israeli banks to adopt and implement the Basel II capital accord from the beginning of 2009, in an effort to improve risk management and capital adequacy in the financial system. Hizkiyahu, who has sent a draft directive to the banks ordering them to prepare and commit themselves to fully implement Basel II in less than two years time, announced on Wednesday that he and his department will hold a series of meetings over the next couple of months with representatives of the banks and other bodies to assist them with information and guidelines in order to ease the transformation and adoption of the new system. Basel II, or the new Basel Capital Accord, lays down guidelines for determining the minimum capital requirements for banks and tightens the link between credit risk and capital allocation or capital adequacy. These guidelines, which are planned to be adopted by 49 countries, provide a system of models for weighting credit and operational risks run by banks in their loans to retail and corporate customers. Capital adequacy ratios of Israeli banks have been just above 10 percent. Yet, even though this figure is above the minimum 9% required by the Bank of Israel, it is still low on an international comparison. In most European countries similar to Israel in terms of population and GDP, the capital adequacy ratio stands at 12-13%, with the minimum requirement being 8%. The significance of this ratio is that it expresses the ability of a bank to deal with most of the expected financial losses in doing business with customers. As such, a higher capital adequacy ratio means that the bank has a "safety cushion" large enough to cover expected losses. Dov Halperin, CEO of the Halperin Consulting Group, which assists banks and large corporations in Israel in implementing advanced information systems in the risk management market, estimated that implementing Basel II would cost an Israeli bank between $6 million and $10m. and would take two to three years.

Join Jerusalem Post Premium Plus now for just $5 and upgrade your experience with an ads-free website and exclusive content. Click here>>

Related Content

The Teva Pharmaceutical Industries
April 30, 2015
Teva doubles down on Mylan, despite rejection

By GLOBES, NIV ELIS