Kuala Lumpur – Affin Bank Berhad (AFFINBANK)  announced that it has successfully deployed Basel II, as set by Bank Negara Malaysia (BNM) for all banks.
Kasinathan Kasipillai, AFFINBANK Chief Risk Officer said ‘We are proud to be ahead of schedule in terms of meeting the BNM deadline. The completion of Basel II requirement in advance has given us a parallel opportunity to focus on our business goals in 2008, that is to offer Banking Without Barriers™ to our customers.
In compliance with Basel II, AFFINBANK had appointed SAS Malaysia as its solution partner to integrate its risk management procedures, which have previously been separated from the business lines.
AFFINBANK has emerged as a leading bank in Malaysia in terms of complying with the Basel II deadline although one of the last banks to launch Basel II compliance initiatives.
“The Basel ll deadline was looming close and other banks had already begun implementation, but we thoroughly researched Basel ll’s importance and benefits to ensure that we had the right team that would be able to align standards to the bank’s vision. People talk of having the first mover advantage but then AFFINBANK was able to benefit greatly from SAS’ prior experience of having worked with other banks globally.
As a result, we managed to avoid many implementation pitfalls,” said Kasinathan. “For a start, we have adopted the Standardized & Basic Indicator approaches to compute capital adequacy for credit and operational risks 2 respectively. For credit risk, we plan to adopt the second stage (Internal Rating Based Models) over time. As clean and verifiable data is critical to corroborate the soundness predictive qualities of the rating models, AFFINBANK has started work on more stringent data requirements for this progression” he added.
”We chose SAS as our solution partner in view of their proven expertise in the field. That played to our advantage as with the completion of Basel II, we are now able to produce faster “time to intelligence” reporting and provide our customers with improved risk management expertise towards better banking practices. We look to have a better knowledge of our customer portfolio which we can now manage more proactively and profitably”, he said.
According to Kasinathan, the Affin banking group strongly supports the principle of a more risk sensitive approach to capital adequacy and therefore the new Basel II framework. It recognizes that Basel II is a driver for continuous improvement of risk management practices, but in the short term, it is also a significant regulatory exercise.
AFFINBANK’s partnership with SAS Malaysia involves the implementation of the SAS Enterprise Risk Management Solution. The SAS Solution facilitates the process of data integration and management which is required for the bank’s capital adequacy ratio computation. It also provides the Bank with comprehensive risk-related reporting capabilities to meet both internal management and Basel related reporting.
Yip Yoke Ling, Professional Services Director, SAS Malaysia says, ‘SAS local presence and proven risk software implementation in over 150 banks globally was the deciding factor that leads to the partnership
between AFFINBANK and SAS. ‘While customers initiate Basel II projects for compliance, they selected SAS as the solution to take them beyond Basel, where risk management is a fundamental and key management technique towards better banking practices. SAS with its intelligence platform, banking specific data models and complete risk solutions allow for a faster and more comprehensive implementation.’
‘SAS is extremely proud that we managed to assist AFFINBANK to begin its Basel II operations. This significant success is attributed to the commitment and teamwork between both teams who worked hard to ensure we are not only ahead of schedule in terms of meeting the deadline but that AFFINBANK and their customers will be able to benefit from it,’ she added.
The Basel II framework seeks to strengthen financial stability by better aligning a bank's regulatory capital to actual risks. This process is supervised by BNM and banks with a lower risk profile stand to gain.
3 According to the mandate set by BNM, all banks in Malaysia are required to compute their capital adequacy ratios under Basel II commencing January 2008. However, an exception applies to banks that have chosen to adopt the more advanced Internal Rating Based approach to computecapital adequacy. These banks have been given an extension until 2010.