Over the next week or two (as I get some time) I will be doing a series on the Basel II projects of the majors and the large regionals. All of these are currently targeting “Advanced” accreditation.
I have only been personally involved in a couple of these so the posts in this series will at least partly be based on hearsay, scuttlebutt and may, in some cases, be out of date; so feel free to correct and update as you believe is correct. I also remind you of our comments policy have a look at the FAQ page. I propose to tackle these in alphabetical order, so it will be the ANZ, Commonwealth, HBOSA (BankWest), NAB, St. George, Suncorp, and Westpac.
Tackling the ANZ first is probably fair, as they were also the first to properly embrace the Basel II process back in 2002. They also have some of the more interesting problems to overcome, with a large number of front-, middle- and back-office systems in comparison to the other banks. Up front, the ANZ decided to budget $40 million on the project – one of the first to truly understand the scale of the enterprise.
Early on, it was decided that Basel II compliance should be a way of driving major change within the bank. The “One Customer View” concept, bringing together the information in all the separate systems to allow a relationship manager to bring up all the information relevant to a customer on a single screen is a good concept – but a difficult one to achieve when the information is spread amongst a lot of systems. Long term, I believe this is the right way to go. Getting the maximum benefit out of Basel II involves re-orientating a bank around being truly risk-focussed and being able to manage each customer as an individual, with their individual risk profile considered.
As you may expect with a project of this ambition, however, the
result has been, unfortunately, some delays. While the corporate
accreditation is, I understand, proceeding apace, the retail data
accreditation is proving problematic – with a 6-month delay in the
current process. While this may not delay the whole Basel accreditation
it is causing some heartache and a lot of midnight oil to be burnt. APRA
can also be expected to pay close attention as the deadlines approach
and some early pillar 2 actions can be expected.
Overall, then the summary would be an ambitious project that has suffered somewhat from that ambition. The upside of the ambition though, is that once it is finished it should greatly improve the bank – if they do not decide to scale back too much to achieve compliance.