Accenture Basel III and Its Consequences

8/12/2019 Accenture Basel III and Its Consequences

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Basel III and Its ConsequencesConfronting a New Regulatory Environment


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Recent fiscal crises demonstrated

numerous weaknesses in the globalregulatory framework and in banksrisk management practices. As a result,regulatory authorities have discussedseveral new measures to increase thestability of the financial markets. Onecentral focus is strengthening globalcapital and liquidity rules (Basel III)with the goal of improving the bankingsectors ability to absorb shocks arisingfrom financial and economic stress[Source: Basel Committee on BankingSupervision (Dec. 2010) - Basel III: A

global regulatory framework for moreresilient banks and banking systems].

Basel III introduces several newor enhanced rules, including theintroduction of a new and stricterdefinition of capital designed toincrease quality, consistency andtransparency of the capital base andthe introduction of a global liquiditystandard. The two new liquidity ratios the short-term Liquidity CoverageRatio (LCR) and the longer-term Net

Stable Funding Ratio (NSFR) speakto the need for banks to increasetheir high-quality liquid assets and

obtain more stable sources of funding,

while requiring they adhere to soundprinciples of liquidity risk management.Basel III also imposes a new leverageratio, a supplement to the risk-basedBasel II framework. By setting 3percent as the ratio of Tier 1Capital to total exposure, the newleverage ratio may limit banks scopeof action.

Moreover Basel III increases capitalrequirements for counterpartycredit risk arising from derivatives,

repurchase agreements (repos)and securities financing activities.The new framework also containsmeasures addressing the reductionof the cyclical effects of Basel II, aswell as the reduction of systemic risk.For instance, it introduces a capitalconservation and countercyclicalcapital buffer, and discusses through-the-cycle provisioning [Sources: BaselCommittee on Banking Supervision(Dec. 2010) - Basel III: A globalregulatory framework for more

resilient banks and banking systemsand Basel Committee on BankingSupervision (Dec. 2010) - Basel III:

International framework for liquidity

risk measurement, standards andmonitoring]. Basel IIIs approach tosystematically important financialinstitutions (SIFIs) has not yetbeen finalized, but may include acombination of capital surcharges,contingent capital and bail-in debt.1

Another Basel III element underdiscussion is the so-called singlerule book, i.e. the creation of alevel playing field and the removalof discretionary rule-making at thenational level.

The new regulations will increasecapital requirements and drive upcapital as well as liquidity costs andthus increase pressure on banksprofitability.

Introduction

1Currently there is no classification of SIFIs.


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Basel III elements Key aspects

Regulatory Capital Raising quality, consistency and transparency of the capital base

Predominant form of Tier 1 Capital must be common shares and retained earnings(common equity Tier 1, [CET1])

Deductions have been harmonized and generally applied at the level of CET1

Tier 2 Capital instruments will be harmonized

Tier 3 Capital instruments will be eliminated

Risk Coverage Raising capital requirements for the trading book and complex securitizations

Capital requirement for counterparty credit risk (CCR) based on stressed inputs

Capital charge for potential mark-to-market losses (credit valuation adjustment, [CVA])

Raising counterparty credit risk management standards (e.g. wrong way risk)

Strengthening standards for collateral management and initial margining

Establishing strong standards for central counterparties (CCP)

Leverage Ratio Introducing leverage ratio as a supplementary measure to the risk-based Basel IIframework

Procyclicality Dampening cyclicality of the minimum requirements (e.g. through-the-cycleparameters)*

Promoting stronger forward looking provisioning (expected loss approach)*

Introducing capital conservation buffer

Introducing countercyclical buffer

Addressing systemic risk and interconnectedness (e.g. capital surcharge for SIFIs)*

Liquidity Standard Introducing liquidity coverage ratio (LCR)

Introducing net stable funding ratio (NSFR)

Introducing common set of monitoring tools

* Discussions on final requirements are ongoing.

Basel III elements and key aspects


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According to the current consultation

paper [Sources: Basel Committeeon Banking Supervision (Dec. 2010)- Basel III: A global regulatoryframework for more resilientbanks and banking systems andBasel Committee on BankingSupervision (Dec. 2010) - Basel III:International framework for liquidityrisk measurement, standards andmonitoring] the new rules will comeinto force January 1, 2013, therebydifferent phase-in arrangementshave been agreed to (see Figure 1).Although some Basel III requirementswill be introduced at a later stage,with full implementation by 2019[Sources: Basel Committee on BankingSupervision (Dec. 2010) - Basel III:A global regulatory framework formore resilient banks and bankingsystems and Basel Committee onBanking Supervision (Dec. 2010) -Basel III: International framework forliquidity risk measurement, standardsand monitoring], banks should deal

actively with the new regulationsnow. Large banks are already taking

actions such as issuance of capital

under consideration of the neweligibility criteria or adjusting theirfunding strategy, to comply withBasel III. The market expects banksto comply with Basel III before theregulatory timeline pushing them toa faster implementation. In addition,the observation periods require banksto be able to calculate their newratios before the introduction date[Sources: Basel Committee on BankingSupervision (Dec. 2010) - Basel III: Aglobal regulatory framework for moreresilient banks and banking systemsand Basel Committee on BankingSupervision (Dec. 2010) - Basel III:International framework for liquidityrisk measurement, standards andmonitoring].

The implementation as well as thetimeline of the new regulationswill vary from region to region. Forinstance in Switzerland the authoritieshave defined additional capital

requirements beyond the base asdefined in Basel III (Swiss Finish).In the European Union (EU), Basel III

will be implemented with the Capital

Requirements Directive IV (CRD IV)which should be published by theEuropean Commission in June orJuly 2011. While the political processis quite advanced in the EU, someaspects of Basel III need furtherdiscussion, such as the definition ofhigh-quality liquid assets. Othertopics will be tested during theobservation periods.

Also in discussion is whether someelements of Basel III should be

implemented directly through an EURegulation without any adjustmentby the national authorities. Finally,it should be noted that severalamendments to the capital frameworkhave already been implementedthrough the CRD II and CRD III (e.g. inthe area of securitization or in hybridcapital instruments).

Timeline

Figure 1: Phase-in arrangements [Sources: Basel Committee on Banking Supervision (Dec. 2010) - Basel III: A globalregulatory framework for more resilient banks and banking systems and Accenture Risk Management]

3.5%

3.5%

4.5%

8.0%

8.0%

4.0% 4.5%

4.0% 4.5%

20% 40%

5.5% 6.0%

8.0% 8.0%

8.0% 8.0%

4.5%

2.5%

7.0%

100%

6.0%

8.0%

10.5%

4.5%

1.875%

6.375%

100%

6.0%

8.0%

9.875%

4.5%

1.25%

5.75%

80%

6.0%

8.0%

9.125%

4.5%

0.625%

5.125%

60%

6.0%

8.0%

8.625%

2013 2014 2015 2016 2017 2018 as of 2019Capital

Introduction LCR and NSFR* LCR NSFR

Introduction Leverage Ratio LeverageRatio**

Min. Core Tier 1 Capital Ratio (% of RWA)

Capital Conservation Buffer (% of RWA)

Min. Core Tier 1 plus Capital Conservation Buffer(% of RWA)

Phase-in of deductions from Core Tier 1

Min. Tier 1 Capital (% of RWA)

Min. Total Capital (% of RWA)

Min. Total Capital plus Capital Conservation Buffer(% of RWA)

Countercyclical Buffer

Capital instruments that no longer qualify as

Non-Core Tier 1 Capital or Tier 2 Capital

Phased out over 10 year horizon beginning 2013 (reduction of 10% per year)

Range between 0-2.5% (common equity or other fully loss absorbing capital)

Leverage Ratio

Liquidity Standard

Note: Orange numbers indicate transition periods and all dates are as of January 1st.

* Reporting to supervisory authorities is expected by January 1, 2012 for both.** January 1, 2013 to January 1, 2017 parallel run period.


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Challenges Banks Have To Face

Figure 2: Impact of Basel III on the calculation of the Capital Ratio [Source: Accenture Risk Management]

Non-core Tier 1 Capital

Core Tier 1 Capital

Increased capital requirements

Required capital ratio =Capital(according to new definition)

RWA(Credit-, Market-, Operational Risk)

Increased RWAs

Higher risk weights for (re-)securitizations

Higher capital requirements for tradingbook positions (Stressed-VaR, IncrementalRisk Charge)

Higher capital requirements for counterpartycredit risk exposures arising from derivatives,repo-style transactions and securities financingactivities (CVA risk, Wrong Way risk)

Stricter capital definition

Increased quality of Tier 1 Capital (goingconcern)

Simplification and reduction of Tier 2Capital (gone concern)

Elimination of Tier 3 Capital

New eligibility criteria and limits for capitalcomponents

Countercyclical Buff er

Capital Conservation BufferTier 2 Capital

2.0%3.5% 4.0%

4.5% 4.5% 4.5% 4.5% 4.5%2.0%

1.0%1.5%

1.5% 1.5% 1.5% 1.5% 1.5%4.0% 3.5%

2.5% 2.0% 2.0% 2.0% 2.0% 2.0%

0.6% 1.3% 1.9% 2.5%

-2012 2013 2014 2015 2016 2017 2018 2019

0-2.5%

Basel III requires better capital endowment and simultaneously results in higher RWAs

Basel III will undoubtedly hit banks

hard through its range of new andstricter regulations, whether becauseof higher capital requirements, thenew liquidity standard, the increasedrisk coverage, the new leverage ratioor a combination of the differentrequirements. The aggregate effectof the requirements both those thatare imminent and those that are stillin discussion will vary from bank tobank, and among large banks almostall will have to deal with its far-reaching implications.

Taking a closer look at the changesin the capital requirements, we seea number of negative effects whoseinterplay can stress banks capital basesignificantly. On the one hand thestricter capital definition lowers banksavailable capital. At the same timethe risk weighted assets (RWA) forsecuritizations, trading book positionsand certain counterparty credit riskexposures are significantly increased.

Both effects decrease banks realizedcapital ratios enormously. On the

other hand the required capital ratio

is increased over the next few yearstill 2019 (see Figure 2). These twocounterbalancing effects will posea major problem for some banks tomeet the required capital ratio, makingcorresponding measures inevitable.

This major impact can also beseen in the latest QuantitativeImpact Study (QIS) published bythe Basel Committee on BankingSupervision (BCBS) in December2010. One important result is that a

full implementation of the Basel IIIpackage would lead to a reductionof CET 1 Capital by more than 40percent, creating a shortfall of 577billion Euros for the 91 Group 1 banks[Source: Basel Committee on BankingSupervision (Dec. 2010) : Resultsof the comprehensive quantitativeimpact study] i.e., those participantsof the study that have Tier 1 Capitalin excess of 3 billion Euros; are welldiversified; and are internationally

active. The expected decline in CET1 Capital is attributable primarily to

reductions in the goodwill that banks

can carry on their balance sheet andthe deduction of deferred tax assets[Source: Basel Committee on BankingSupervision (Dec. 2010) : Results ofthe comprehensive quantitative impactstudy]. At the same time the Group 1banks overall RWA would increase by23 percent, mainly due to increasedcapital charges for counterparty creditrisk (CCR) and trading book exposures[Source: Basel Committee on BankingSupervision (Dec. 2010) : Results ofthe comprehensive quantitative impactstudy].

In addition to the stricter capitalrequirements, the introduction ofthe LCR and NSFR will force banksto rethink their liquidity position,and potentially require banks toincrease their stock of high-qualityliquid assets and to use more stablesources of funding. Again the BCBS-QIS documents an urgent need for adramatic change in banks liquidity

management. Large banks currentlyhave an average LCR of 83 percent,


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2Since January 1, 2011 the CEBS has been replaced by the European Banking Authority (EBA) due to the new European financial supervisory framework.

Note: Basel III reform requires a LCR 100% and a NSFR > 100%.

whereas the EU-QIS conducted by

the Committee of European BankingSupervisors (CEBS)2in December2010 shows an even lower ratio of67 percent [Source: Committee ofEuropean Banking Supervisors (Dec.2010): Results of the comprehensivequantitative impact study]. For theNSFR, the results are slightly less severebut would still make correspondingmeasures necessary, with an averageNSFR for large banks of 93 percentin the BCBS-QIS and 91 percent inthe EU-QIS [Source: Committee ofEuropean Banking Supervisors (Dec.2010): Results of the comprehensivequantitative impact study].

Basel III also introduces a non-riskbased leverage ratio of 3 percent.According to the BCBS-QIS, asignificant subset of Group 1 banksfailed to meet this requirement. Whilethe average leverage ratio of Group 1banks is 2.8 percent, there aresignificant variations within this group.

Obviously, the implications of the newBasel III leverage ratio depend on the

specific situation of each institution.

The EU-QIS shows an even lowerleverage ratio of 2.5 percent for largeinstitutions, leading inevitably eitherto a capital issuance, a reduction ofexposures, or a combination of both.

The potential impact of Basel III onthe banking system is significant, sobanks need to think these challengesthrough carefully in 2011. Thisimpact will vary from institutionto institution, depending upon thelines of business in which the bank is

active and the geographic region inwhich it does business. Neverthelessit is foreseeable that, in particular,banks with an increased exposurein trading positions, a significantsecuritization portfolio and largeractivities in derivatives, repo-styletransactions and securities financingactivities will suffer more than others.Due to new limits and increased assetvalue correlations within the newCCR framework, the overall interbank

business will be penalized as well.

Furthermore, there will be higher

regulatory costs for banks dueto ongoing changes in regulatoryrequirements, which can be quitemeaningful depending upon the sizeof the bank and the complexity of itsbusiness. The Basel III landscape ischanging rapidly, with new regulationsand requirements published by thecorresponding national authoritiesalmost every week; merely keeping upposes a strain on bank resources.

Generally, banks will experience

increased pressure on their Return onEquity (RoE) due to increased capitaland liquidity costs, which along withincreased RWAs will put pressureon margins across all segments. Inorder to become compliant with thedifferent new Basel III requirementsand, at the same time, to restore theprofitability of their businesses, bankshave a variety of potential measuresthey can take.


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How Banks Might Respond

The impact of Basel III on banks calls

for concentrated and reasoned actions.Apart from just attaining compliancewith the new regulations, banks especially those with high internalstandards and demands will gobeyond compliance and take measuresto restore profitability. Banks willassess their lines of business, levels ofrisk profiles and capital endowmentsas well as their funding strategiesto take the right steps towardscompliance and increased profitability.Numerous actions with differentduration and range are available toachieve these objectives.

Operational Responses

Basel III creates incentives for banksto improve their operating processes not only to meet requirements butto increase efficiency and lower costs.Banks have already begun to examineareas such as:

RWA optimization, including modelrefinement, process improvement,enhancement of data quality, andframework alignment

Reducing credit exposure and

potential credit losses throughstricter credit approval processesand, potentially, through lowerlimits, especially in regard to bankexposures

Improving liquidity risk managementprocesses including stress testingand development of contingencyfunding plans

Fostering closer integration of riskand finance functions

Integrating all subsidiaries throughconsistent, group-wide risk andcapital management standards

Tactical Responses

Besides the rather short-termoperational responses banks have anumber of more far-reaching tacticalactions they can take to respond,especially to profitability concerns. Wesee the focus of tactical responses on

the areas of pricing, funding and assetrestructuring. While tactical responsesby definition do not address long-term strategic issues, they may be

extremely helpful in relieving pressure

on profitability.

Among tactical responses available tobanks are:

Adjusting lending rates, dependingon competition within the specificsegments and each segmentsstrategic importance for the bank

Reflecting higher capital andliquidity costs through more risk-sensitive pricing and performance

measurement

Shifting to higher-value clients withregard to profitability

Shifting to less risky segments in theportfolio, with fewer securitizations,lower trading book exposures andreduced activities in areas such asderivatives, repos and securitiesfinancing

Increasing the level of high-quality

liquid assets

Changing the mix of funding andliquidity reserves to longer-term

Figure 3: Potential responses to Basel III changes

Processes

Methods Data

Examples of operational

responses

RWA optimization

Stricter credit approval

processes

Operational responses Tactical responses

Pricing

Funding Asset restructuring

Examples of tactical

responses

Risk-sensitive pricing

Shift to longer-term funding

Reduction of securitization

exposures

Strategic responses

Business model

Group organization Equity

Examples of strategic

responses

Sale of business unit

Change of holding structure


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funding, for instance by replacing

interbank funding with longer-termdebt and increasing the maturity ofdeposits

Reducing total exposure, both on-and-off-balance-sheet, with regardto risk and profitability

Strategic Responses

In reviewing their strategic responsesto Basel III and to the dangers ofreduced profitability, banks have the

opportunity to effect major changesthroughout all areas of the institution.These include fairly straightforwardinitiatives such as retaining earningsto increase Tier 1 Capital but alsoencompass a broad range of far-reaching possibilities including:

Issuing new capital in light of thenew eligibility criteria and phase-inarrangements

Changing liquidity risk and funding

strategy

Taking a more active approach tobalance sheet management

Engaging in more active client

management, for instance byadjusting client segmentation anddevoting more or fewer resourcesto clients at specific levels of size orprofitability

Undertaking strategic costreductions, including rationalizationof branch structures, productrationalization or implementation ofa shared services model

Changing the business model,

which may entail selling high-risk business units, entering newproduct segments or businesses, oroutsourcing or off-shoring non-corefunctions

Changing the group structure, forexample by selling off minorityinterests in financial institutions

No matter what actions banks take toreach compliance with Basel III and torestore profitability, all actions shouldbe harmonized to create an efficientapproach and achieve the best possibleresults.

Accenture believes that, in the

final analysis, even the most well-capitalized and managed banks willexperience lower profitability in thepost-Basel III environment despite therange of possible responses.

Figure 4: How to rebuild RoE post crisis

Accenture has analyzed the impact of the financial crisis on an exemplary banks RoE and the ways to rebuild profitability

26%

-5%

-6%

-6%

-2%

-3%

1%1%

3%

5%1-5%

4%

15+%

To be

estimated on

a case by

case basis

HighperformerRoE2007-2009

Highercapitalratio

De-leveraging

Highercost offunding

Reducedfee income

NPLprovisionincrease

Post crisisbasis case

Pricingoptimiza-tion

Effectiveriskmanage-ment

Effectivecustomermanage-ment

Strategiccostreduction

Inorganicgrowth

Post crisisstrategicoptions

Source: Accenture Research; In bold, levers used to quantify impact on RoE


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Potential Challenges of Basel IIIImplementation

Basel III, with its comprehensive

requirements, forces banks to takea number of actions to meet thevarious new regulatory ratios andto restore, at least partially, theirprofitability. Before undertakingsuch actions, banks must be able tocalculate and report the new ratios,requiring a huge implementationeffort . Since Basel III covers a largenumber of areas, a thorough reviewof respective data and IT architecture,risk methodologies, governancestructure, reporting systems, as wellas the corresponding processes isneeded to accomplish a successfulimplementation. Banks should befully aware of these challenges asearly as possible before startingtheir Basel III implementation. Toget a better picture of the potentialpitfalls we have categorized theissues as functional, technical andorganizational implementationchallenges (see Figure 5).

The functional challenges includedeveloping specifications for the newregulatory requirements, such as themapping of positions (assets and

liabilities) to the new liquidity and

funding categories in the LCR andNSFR calculation as well as to thestricter defined capital categories.Within the LCR the stress testingmethodologies need to be specifiedtaking into account the characteristicsof the bank. Further functionalchallenges refer to the specificationof the new requirements for tradingbook positions and within the CCRframework (e.g. CVA) as well asadjustments of the limit systems withregard to the new capital and liquidityratios. Crucial is the integration of newregulatory requirements into existingcapital and risk management as somemeasures to improve new ratios (e.g.liquidity ratios) might have a negativeeffect on existing figures.

The technical challenges of BaselIII implementation includes dataavailability, data completeness,data quality and data consistencyto calculate the new ratios. Our

experience indicates that in somecases highlighting data availability asthe key criteria for calculating liquidityratios and analyzing the completeness

of the data in the different enterprise

systems and data pools can bebeneficial. Further technical challengesresult from the adjustments of thefinancial reporting system with regardto the new ratios and the creation ofeffective interfaces with the existingrisk management systems.

Compared to Basel II with its majorfocus on credit and operational risks,the Basel III requirements cover awider range of topic areas includingthe banks capital, liquidity and risk

management. In Accentures view,the key to a successful Basel IIIimplementation is to set-up a BaselIII project team that will consider thedependencies between the differenttopic areas and that will coordinatethe different functional, technicaland operating units and departmentssuch as risk and finance as well asIT and business departments. Closecooperation will be inevitable tokeep implementation costs down

while providing necessary resourcesfor compliance and for subsequentefforts to rebuild profitability. Theseorganizationalchallenges need to

Figure 5: Functional, technical and organizational challenges of Basel III implementation

Organizational

Functio

nal

Tech

nica

l

Technical implementation ofnew regulatory requirements

Data availability and quality

Technical integration intoexisting risk managementsystems (e.g. interfaces)

Functional specification ofnew regulatory requirements(e.g. stress testing, limitsystem, riskquantification)

Functional integration ofnew regulatory requirementsinto existing capital and riskmanagement

Coordination of different units as well as withinthe group

Responsibilities within implementation andbeyond

Availability of resources

Implementationchallenges of

Basel III


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be managed to develop a group-

wide response and also includethe assignment of responsibilities both within the framework ofimplementation, and beyond intoefforts to rebuild profitability andto allow for an integrated capital,liquidity and risk management. Toachieve these objectives, identificationand securing of the resources must beconducted to accomplish the full rangeof required initiatives.

Banks that deal with Basel III effectively

will establish a transparent, structuredorganization with clear responsibilitiesat all levels, with comprehensivegovernance for newly created models,processes, and data. They willmake available sufficient resourcesthroughout the implementation toallow for a concerted and efficientexecution, and will, if necessary, createnew functions to deal with matterssuch as asset disposal.


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How Accenture Can Help

The demands and challenges of the

Basel III implementation are bothnumerous and complex, and call foran efficient and structured approachto mitigate the impact of Basel III. Inworking with banking clients on theirresponse to the Basel III requirementsacross the globe, Accenture usesa proven and target-oriented three-stage approach along with our rosterof dedicated tools. Our approach ismodular, flexible and scalable and takesinto account the specific context ofeach client. It allows not only for an

efficient Basel III implementation butalso initiates appropriate measures tomitigate the negative effects of Basel IIIon the bank.

The first stage is devoted to ananalysis of the banks current situationand to help identify the scale andfocus of the project. Accenture hasdeveloped a proprietary Basel IIIDiagnostic Tool with a modular set-upto help identify actions necessary tomeet the requirements the bank has

defined for satisfying the regulationsdetailed in CRD II through IV, withthe tool providing an efficient andeffective gap analysis (see Figure 6).

In the second stage, with deviations

from Basel III identified, thebank establishes priorities forimmediate action while planningfor implementation. The planningprocess takes the banks specificcharacteristics, as well as its ownstrategic priorities, into consideration.This stage also involves estimating thetotal Basel III implementation effortand uses business cases to verifythe measures needed in a detailedimplementation plan (see Figure 6).

Stage one and two together build theBasel III preliminary review which istarget-oriented and can be conductedwith the help of our dedicated BaselIII Diagnostic Tool within a few weeks,depending on the size and complexityof the banks business.

During the third stage, the plan isimplemented, with project planningtools used to identify and correctdeviations from the project plan.

With Accentures help the Basel IIIimplementation can be effectivelyconducted by a dedicated team offunctional and technical personnel

with extensive project management

experience in the risk and bankingarea, using our proven projectmanagement tools (see Figure 6).

Depending upon the results ofthe gap analysis, the overall BaselIII implementation could takeapproximately two years (subjectto the size and complexity of thebank, its current situation and ITarchitecture), from commencementof the preliminary review throughproject set-up and design,

development of functional concepts,and IT implementation of necessarycomponents for Basel III. Built intothe process are regular reports onrisk and issue management as well asprogress tracking and status reporting.Accenture can support banks intheir efforts to address the changesrequired by Basel III as well as toundertake measures to mitigate theadverse effects of Basel III.

Figure 6: Accentures Basel III approach

Our Basel Risk Management approach is modular, flexible and scalable and takes into account the specific context of each client

Stage 3: Implementation

of measures

Stage 2: Prioritization options

of action & implementation

planning

Stage 1: Gap analysis &

derivation options of action

Approach and Tools

The Accenture Delivery Method

supports the planned implementation in

terms of time, budget and quality

parameters

Project management tools, Risk and

Issue Management, Progress Tracking

and Status Reporting illustrate deviations

from the project plan and target

achievement and initiate counteractivemeasures

Long-time project management

experiencein the Basel field in functional,

technical and process-related areas

Create an implementation plan that

respects the banks priorities and focus

The Effort Estimatordelivers a resilient

estimation of the implementation effort

Based on Business Caseswe help to

validate and prioritize the measures in a

detailed implementation plan

With our project experiencewe can

analyze your initial situation quickly and

determine the project focus

Our Basel III Diagnostic Tool identifies

gaps between the banks situation and

requirements the bank has defined

regarding CRD II IV


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The new Basel III requirements expose

banks across the globe to majorchallenges regarding their capital andliquidity requirements as well as theirrisk management. The revised Basel IIIproposals were published in December2010 by the Basel Committee onBanking Supervision and will bephased in over the next couple ofyears. Identifying the necessary stepsfor compliance and developing acomprehensive plan to address theissues and concerns raised by Basel IIIare by now a significant undertakingfor most banks.

Accenture works with banks in anumber of areas to address Basel IIIissues and set priorities for thenear, mid- and longer term. Withour extensive experience acrossa wide variety of aspects of riskmanagement, and long-time projectmanagement experience in Basel-related areas including functional,technical and process-related

assignments, Accenture is well-suited to help banks chart a coursein the Basel III landscape. Accenture

brings to bear a wealth of highly

experienced professionals as well asproject management tools to assistin identifying the gaps to effectivelyimplement Basel III, address risk andissue management, progress trackingand status reporting, helping identifydeviations from the project plan,target achievements and initiatemeasures to get back on the path tocompletion.

We believe that the real challenge foraffected banks will be to build upon

the actions mandated by Basel IIIto create stronger capital and riskstructures. Banks that meet andsurpass the Basel III requirements maynot return to levels of profitabilityexperienced before the global financialcrisis of 2008 and 2009, but they willbe in position to be well-preparedfor the next crisis and achieve highperformance within their industry.

Conclusion


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Michael Auer

Michael is executive principal Accenture Risk Management, Munich,responsible for German-speakingmarkets. Michael has 18 years ofindustry and consulting experiencein financial services and riskmanagement across Europe workingwith global institutions to transformtheir business and risk capabilities.His extensive experience in riskmanagement mainly in the areas ofmarket, credit and operational risk, risk

and regulatory matters and operatingmodels helps executives and theirmultinational firms become high-performance businesses.

Georg von Pfoestl

Georg is manager Accenture RiskManagement. Based in Vienna, Georghas nearly 8 years of experience in thearea of risk management with a focuson credit and liquidity risk, regulatorymatters and Risk Weighted Assetsoptimization. With his experience asa banking inspector at the AustrianNational Bank, his pragmaticknowledge from working with regionaland international financial institutionsacross German-speaking markets

and his technical skills pertainingto Basel II and Basel III regulatoryrequirements, he guides companies ontheir journey to high performance.

Jacek Kochanowicz

Jacek is manager Accenture RiskManagement. Based in Frankfurt,Jacek has nearly 7 years of experiencein risk management across Europe, theMiddle East and South Africa wherehe worked with several regional andinternational institutions to improvetheir risk capabilities. His extensiveexperience in risk management,especially credit risk, asset and liabilitymanagement, economic capital andstress testing helps clients become

high-performance businesses.

About the Authors


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Accenture Basel III and Its Consequences