This proposal is designed to solicit interest for a blog to be set up to canvas bank risk management issues in Australia. It is not, and should not be, regarded as an official project of any bank or other organisation in Australian or overseas – more as an attempt to allow discussion of the issues as they arise. It should also be emphasised that this will be strictly informal and no reliance should be placed on this for any purpose whatsoever.
Following the decision by APRA to follow the BCBS guidelines for prudential management, including the Basel II Accord, a considerable amount of discussion and debate has occurred on many topics surrounding their implementation. These include, but are not limited to, the general questions of how the Accord and associated documents are to be interpreted and precisely how these are to be implemented in an Australian context.
It is not anticipated that these discussions will end when Basel II is fully implemented, particularly as Basel II is already in discussion. Like Basel I, Basel II will also evolve over time.
These issues are often thrashed out in informal and formal meetings between the Australian and foreign ADIs in Australia, the professional firms (predominately the big 4 accounting firms), the regulators and other consulting firms. While these meetings have proved productive, they are frequently less than transparent, particularly to those not in attendance and many of the participants come away from them with differing interpretations of what was said. They also do not provide immediate feedback to problems or issues.
A Possible Solution
A possible solution would be to establish a web site, with free access to all, to read and canvas issues on a real time basis in a blog format. As this would be public access, with a full and searchable history, it should allow a solution to the issues identified above. It will not replace the current meeting structures but should act as an adjunct to them, allowing continuing discussions amongst interested people to (hopefully) arise at a consensus on particular issues, involving more than can regularly attend these meetings.
There are, of course, problems with this proposal; but not ones that cannot be overcome. These are:
2 Funding; and
Ensuring that the people who post original articles are appropriately qualified and likely to post articles of interest is the major deciding factor in the success or otherwise of a blog. In short, if the articles posted are not relevant and interesting then visitor numbers will be low and constructive comment rare. Ensuring that articles are regular is also important.
This issue should be manageable if the correct contributors are chosen. As a suggestion, one contributor should be selected from each of the Australian ADIs using the IRB approach (to allow for each ADI to raise issues), one from each of the major accounting firms, one from APRA and others on a request basis from the smaller ADIs or consulting firms.
It should be emphasised that this site would not be the official views of any of the institutions that these people are employed by. To this end, each could post articles under a pseudonym if required. Real identities need only be known to the other contributors or only the moderator. Naturally, each contributor could elect to follow their own institution’s risk management practices.
A simple, free, pilot blog been set up using “wordpress” as a proof of concept. In the event that it proves popular and useful moving to a commercial platform would be needed to obtain the sort of control that would be advisable. This should be at a cost of around $12 per month with an initial set up cost of approximately $200 for a domain name and some artwork.
Should this be needed, a site sponsor (such as one of the professional firms) could be found to cover this cost, or the contributors could divide meeting the costs amongst themselves. Given the nominal costs involved, this is not thought to be a difficult enterprise.
With any public site ensuring that both the contributors and commenters are kept in check and within site rules is an important consideration. A clear acceptable usage policy would be needed and this would need to be enforced. The author of this post, while unlikely to be a permanent contributor, is prepared to accept the responsibility for drafting this policy and acting as moderator until such time as the contributors nominate a replacement.
This proposal is intended to stimulate discussion on how to manage the ongoing discussion on banking risk management in Australia, particularly in light of the ongoing discussions over the implementation of the Basel II accords and associated BCBS advice to regulators. In proposing an additional measure, it does not seek to replace the existing discussion framework, merely to supplement it with a forum having the potential for wide discussion of any problems and, hopefully, a rapid concensus to be gained on urgent problems.