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Asian Banker Research
Proceedings Report
March 30th , 2011
“How will Basel III impact your Basel II-compliant risk management plan?”
The proceedings of the teleconsultation session with leading risk practitioners to determine the impact of
the new global rules on bank capital and liquidity (Basel III) on Asian banks
I. Background
The following is the proceedings report of the teleconsultation session of senior bankers held on March 30 th
2011 to discuss the impact of the new global rules by the Basel Committee and the Group of 20 nations on
bank capita and liquidity on banks in Asia.
The session was attended by a panel comprising Elbert Pattijn, chief risk officer, DBS Bank,
Singapore, Tsuyoshi Oyama, former deputy director-general, financial system and bank
examination department, Bank of Japan and partner, financial industries group at Deloitte Touche
Tohmatsu, Japan, and Austin Trippensee, senior industry solutions specialist, Oracle Financial
Services Software and moderated by Arush Chopra, senior analyst, The Asian Banker, Singapore.
The teleconsultation session discussed the driving forces, key concerns and challenges relating to Basel III
that the Asian Pacific region’s leading banks are concerned with today.
II. Proceedings Location and Date
Date of meeting: March 30th 2010
Format: Teleconsultation session
III. In Attendance
The session was attended by the following 68 senior executives:
Sal
Ms
Mr
Mr
Ms
Mr
Mr
Mr
Mr
Mr
Full Name
Helen Jang
Benjamin Frank
Martin Davies
Margie
Pagdanganan
Suchir Swarup
Hong Li
Lawrence Koh
Choo Koon San
Perumal
Ramanathan
Title
Senior Risk Manager
EVP, Wholesale Credit Risk
Risk Consulting, Banking Markets
Bank
GE Capital
HDFC Bank
Casual Capital
Director, Audit & Risk Review
AVP, Market Risk Management
Director, Risk & Decision Management
Risk Management, Global Consumer Group
VP & Head Asset Liability Management
Citibank
OCBC Bank
American Express
Citibank Singapore Limited
OCBC Bank
Executive Director
Market Risk Pros
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Ms
Mr
Mr
Winnie Ng
Makoto Hamada
Sam Fox
Mr
Wirot Tantiapikun
Ms
Ms
Ploi Notklao
Thipvadee
Sindhuseka
Mr
Mr
Mr
Mr
Mr
Rohit Suradkar
Bart Piron
Ayuth Krishnamara
N. C. Raghava
Abhijit Sinharoy
Mr
Wong Sing Foo
Mr
Mr
Ms
Mr
Mr
Mr
Ms
Woon Chee Keong
Jeffrey Chua
Chio Su Lan
Nandha Kumar
Subramaniam
Wong Yee Fun
Lim Hao Jyh
Ee Seet Ching
Mr
Mr
Lok Kok Wah
Ulrich Schanz
Ms
Ms
Liu Na
Khaliza Adillah Binti
Khalid
Mr
Mr
Mr
Mr
Mr
Ms
Ms
Mr
Fakhri Sarjan
Sukanto Ghoshal
Lana Awad
Kunal Chowdhry
Khoo Teng Cheong
Sandy Tan
Chlore Tang
Roslan Ahmad
Ms
Ms
Ms
Hooi Hooi Lai Fong
Nor Azlin Ahmad
Anisha Sa’ afi
Mohd Fauzi Mohd
Noor
Roslina Abdul Malik
Suzilla Mohd Ratha
Wong Fook Chun
Fakhrul Azman
Mr
Ms
Ms
Mr
Mr
Analyst
Senior Sales Manager, Enterprise Accounts
Senior Consultant
FVP, Integrated Risk Management and Analytics
Department
Assistant Unit Manager, Integrated Risk
Management and Analytics Department
Unit Manager, Integrated Risk Management and
Analytics Department
Maybank
SAS Institute Pte Ltd
Sheffield Haworth (Asia) Pte Ltd
Vice President, Market & Liquidity Risk
Principal Consultant
EVP, Risk Manangement
Global Risk Trainer
Head, Enterprise Risk Management
Assistant Manager, Risk Portfolio Management /
Credit Risk Dashboard
BNP Paribas
Algorithmics Singapore
Bangkok Bank
Standard Chartered Bank
Visa International
Head pillar 2 basel II
Head pillar 3 basel II
Head ICAAP Pillar 2 Basel II
Maybank
Maybank
Maybank
Head, Model Validation
Head, Corporate Finance & Capital Management
AVP, Corporate Finance & Capital Management
AVP, Corporate Finance & Capital Management
Principal Consultant, Risk Management/Market
Risk
Functional Architect
Consumer Portfolio Analytics & Reporting,
Consumer Credit Risk
Maybank
Maybank
Maybank
Maybank
Head, Financial Analytics & Risk Management
Head Portfolio Management, PBC - Global
Credit Products
Lead Analyst
Managing Consultant, Finance & Risk
VP, Group Planning
Managing Director
VP
AVP
Financial Control
Sector & Franchise Network Performance
Management
Distribution Financial Analytics
Business Financial Analytics
Maybank
Financial Planning
Management Reporting
Performance Management
Risk Management
Risk Strategy & Governance
Maybank
Maybank
Maybank
Maybank
Maybank
Kasikornbank
Kasikornbank
Kasikornbank
OCBC Bank
Murex South East Asia Pte Ltd
Thomson Reuters
OCBC Bank
Deutsche Bank
GE Capital
IBM
DBS
DBS
DBS
DBS
Maybank
Maybank
Maybank
Maybank
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Ms
Bujang
Mohd Faizul Alias
Innayati Izah
Mostaman
Abdul Hamid
Shamsuddin
Siti Zairunisya Mohd
Rasim
Ms
Wong Yi Ting
Mr
Mr
Kum Sook Chin
Ahmad Firdauz Ab
Rani
Mr
Mr
Ng Foong Yee
Sanjay Jagtap
Ms
Mai Tuan Viet
Mr
Ms
Rahul Sharma
Renuka Singhal
Mr
Oh Yann Kai
Thiphakone
Paphassarang
Patrick Tinez
Mr
Ms
Mr
Mr
Mr
IV.
Credit Risk
Maybank
Risk Policy & Review
Maybank
Risk Assessment & Mitigation
Maybank
Risk Analytics & Portfolio Management
Executive, Risk Analytics & Portfolio
Management
Executive, Risk Analytics & Portfolio
Management
Maybank
Executive, Credit Risk
Executive, Risk Analytics & Portfolio
Management
Director
Maybank
Associate, Corporate Banking Credit Risk
Technology
Functional Analyst, Operations & Reporting for
Capital & Liquidity - Basel II
Basel II Assurance Manager
Maybank
Maybank
Maybank
Abhirutu Consultants
DBS Bank
Market Risk, Asia ex-Japan
Barclays Shared Services Pvt. Ltd.
Barclays Shared Services Pvt. Ltd.
Nomura International (Hong Kong)
Limited
Head of Risk Management Solution
Deputy Director, Risk Unit
Murex SEA Pte Ltd
Credit Agricole
Key Discussion Points
The following were the issues identified by the attendees:
1.
2.
3.
4.
5.
6.
Macro issues on Basel III
Impact of Basel III on Asian banks
Concerns with Credit Value Adjustment (CVA)
Regulatory distortions
Concerns with central clearing
Effects on risk assessment via economic capital
1.
Macro issues on Basel III
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Asian banks are better capitalised and more liquid than their western counterparts.
Capital has already been raised by many banks, but more is expected; this, in turn, will lower
ROE and make banks unattractive for investors.
Banks may try to lay off assets to the shadow banking sector.
Even if the above does not happen, banks will have to shed assets to shrink their balance sheets,
reduce the scale of operations and economic growth will suffer.
Liquidity is a bigger concern than capital owing to the sheer size of the debt banks will need to
meet liquidity regulatory obligations.
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2.
Impact of Basel III on Asian banks
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3.
Basel III discriminates against banks holding other bank’s bonds, while EU directive
Solvency II does the same for insurers. As a result, large institutional investors will find
it unattractive to hold those bonds, raising questions about who will hold them.
Basel III may heighten counterparty risk due to currency mismatch as the currency of
the deposit base is mostly the local currency of the bank whereas a substantial part of
the lending is in a different currency. Banks need to run a sizeable swaps book to hedge
the mismatch between the currency of deposit and the currency of loans; but running a
swaps book brings forth its own liquidity issues, making the bank vulnerable to
counterparty risk.
Banks are supposed to hold a large quantity of liquid bonds, mostly sovereign issues, of
which there is an insufficient volume in most Asian markets.
Asian banks will need to recalibrate the macro-risks they face and be creative enough to
assume tail risks in macro-stress scenarios in a Basel III world.
They might also face intensified competition with western and Japanese banks, which
are motivated by Basel III to boost their profitability in conventional banking in Asia.
There is a need to re-align risk management with regulators’ expectations that
emphasise less risk allowance and establish a more top-down, group-wide risk
management approach.
Banks need to support financial innovation, including various trading and securitisation
businesses, to address risk concentration in the banking sector but still satisfy the
diverse needs of the corporate sector.
Concerns with Credit Value Adjustment (CVA)
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4.
The level of capital required for CVA has almost doubled,although the impact of this measure will
be felt more for western banks with large swaps books.
Very limited recognition of credit hedges.
No recognition of IR/FX/EQ elements of CVA charge.
Regulatory distortions
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Discrimination against holding bank bonds.
Sovereign bonds favoured.
In the absence of relevant bonds allowed for meeting liquidity requirements, banks will have to
resort to funding lines from central banks. This leaves the question open if regulators will
be able and willing to provide it given the cost involved in doing so. If some regulators do
so while the others do not, it will create regulatory distortions in the region.
5. Concerns with central clearing
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
Trading via central counterparties (CCP) is favoured from a regulatory capital point of view.
CCP clearing amounts to outsourcing of risk management by banks to a third party.
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
Banks will have no control over what counterparties they are dealing with as CCPs, for
competitive reasons, may lower standards and deal with counterparties that a bank
wouldn’t normally deal with, creating risks.
6. Effects on risk assessment via economic capital
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Net result of Basel III could be that Pillar 1 will always be more important than Pillar 2.
Banks will be tempted to merely manage regulatory capital.
The role of economic capital will be weakened.
For a full review of the presentation and further insights into benchmarking risk management, please visit
www.riskandregulation.theasianbanker.com
This Asian Banker teleconsultation session was supported by Oracle Financial Services Software.
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