Download Press Release

Proposed Regulatory Reforms to Impact Banking Models in Asia, says joint KPMG and
Oracle survey
Redwood Shores, Calif., Dec. 10. 2010 -
Proposed reforms to the Basel Accord are expected to have a significant impact
on banks in Asia-Pacific, according to a recent joint KPMG and Oracle survey of
executives from financial institutions across the region.

Seventy-six percent of respondents said regulatory reforms would affect their
business. Over half said they expect their banks’ business models would need to
change to address regulatory reforms and 48 percent expect their banks would
need to raise additional capital.

Areas of concern include high compliance costs, reduction in the banks’
competitiveness and higher cost of capital, which may become more difficult to
access.

Meanwhile, 72.5 percent said they are of the view that new regulations such as
Basel III should be applied to financial institutions in the Asia-Pacific region.
However, only one-third of respondents thought the reforms would create a “level
playing field” of global banks relative to Asian banks, since the latter are
relatively more capitalised.

The top three important areas of regulation that are of priority to respondents are
capital management, including the Internal Capital Adequacy Assessment Process
(ICAAP), liquidity risk management and enterprise wide stress testing, across risk
categories.

Most respondents thought their banks would require additional risk management
infrastructure. Over 96 percent said they considered that an integrated approach to
risk, performance, compliance and capital was either critical or important/very
important to “Future Proof” themselves. In terms of challenges, 88 percent of
respondents highlighted data related issues while 75 percent pointed to not having
the right IT systems infrastructure in place.

Banks were also asked to consider what key operating areas would be affected as
a result of reforms.78 percent cited lending and risk pricing, 59 percent indicated
performance management systems; 57 percent said trading counterparty
transactions while 35 percent highlighted executive compensation.

Respondents indicated a number of constraints when implementing new
regulatory obligations. These include lack of internal expertise and availability,
complexity and lack of clarity, information technology capabilities, data
availability and reliability.

The regulatory changes are also affecting governance structures and practices.
More than 70 percent said they have had to refine the terms of references of their
risk management committees, while 46 percent indicated that the board needed a
more integrated view of risk management, and 35 percent said they had appointed
a steering committee to oversee the introduction of the new regulatory
requirements.

In terms of the overall impact, 40 percent thought it would improve the economic
environment while an identical number thought the effect would be neutral. The
remaining 20 percent said they feared reforms would have an adverse affect.
Supporting Quotes

“If there is an underlying theme from these regulatory reforms, it is that the new
regulations will hit banks' top and bottom lines, and more costs will be transferred
to customers,” said Dr. John Lee, KPMG Asia Pacific leader for financial risk
management.

“A ‘pooling of tools’ approach falls short in delivering the flexibility and
integrated enterprise view that banks need to meet emerging regulatory
requirements,” said Ms. Saloni Ramakrishna, Principal Architect (Risk &
Compliance solutions) Oracle Financial Services, Asia Pacific & Japan. “We see
data and data architecture mastery, an integrated and flexible technology
infrastructure, interactive and transparent reporting, and functional risk,
compliance and performance solutions as essential requirements for not only
managing, but thriving, in the ‘new normal.”
About the Survey

In September 2010, KPMG and Oracle conducted a survey of financial
institutions across Asia Pacific & Japan, to seek their views on the potential
impact of regulatory reforms on their business activities.

The survey was targeted at c-level executives at banks. Over 40 percent of the
respondents were Chief Risk Officers (CRO), while around 80 percent were
broadly based in the retail and corporate banking sector. Investment banking and
Islamic banking entities are also represented in the survey. Most possess assets
exceeding USD 10 billion.
KPMG is a Platinum level member of Oracle PartnerNetwork.
About KPMG
KPMG is a global network of professional firms providing Audit, Tax and Advisory
services. We operate in 146 countries and have 140,000 people working in member firms
around the world. The independent member firms of the KPMG network are affiliated
with KPMG International, a Swiss cooperative. Each KPMG firm is a legally distinct and
separate entity and describes itself as such.
KPMG China has 13 offices (including KPMG Advisory (China) Limited) in Beijing,
Shenyang, Qingdao, Shanghai, Nanjing, Chengdu, Hangzhou, Guangzhou, Fuzhou,
Shenzhen, Xiamen, Hong Kong and Macau, with more than 9,000 professionals.
About Oracle
Oracle (NASDAQ: ORCL) is the world's most complete, open, and integrated business
software and hardware systems company. For more information about Oracle, visit
oracle.com
Trademark
Oracle and Java are registered trademarks of Oracle and/or its affiliates. Other names
may be trademarks of their respective owners.
Contact Info
Charlotte Sam
Oracle
+65 64361238
[email protected]
Nina Mehra
KPMG China
+852 2140 2824
[email protected]