Risk management and Basel‐Accord‐implementation in Pakistan

Omar Masood and John Fry

Journal of Financial Regulation and Compliance, 2012, vol. 20, issue 3, 293-306

Abstract: Purpose - Recent events demonstrate that problems in the banking system pose a significant threat to the health of the global economy. Despite several shortcomings the Basel Accord thus emerges as an attempt to protect banking systems. The purpose of this study is to shed light on potential barriers to implementation of the Basel Accord in emerging countries. Several issues of wider interest to risk management and financial regulation also emerge. Design/methodology/approach - The paper maps implementation of the Basel Accord against the wider regulatory context. Against this backdrop, the Basel Accord appears well‐motivated but is limited by several practical considerations. These factors, amidst other practical implications, are identified as the paper applies rigorous statistical methods to novel primary survey data from risk managers. Findings - The Basel Accord is generally well‐received due its dual aims of improved capital administration and scientific risk management. Operational risk is a significant barrier to implementation, with a number of further issues only partially addressed (see below). Equally supported by both public and private sector banks the reasons for delay appear due to lack of technical expertise and the level of preparation. Results highlight credit risk, practical implementation issues (IT and HR), minimal capital requirements, data security and operational risk as issues of critical importance. Originality/value - The originality of the contribution lies in the scientific treatment of novel primary data from risk managers tasked with implementation of the Basel Accord. Findings suggest several important practical implications discussed above.

Keywords: Risk management; Basel Accord; Banking; Financial regulation; Emerging markets; Pakistan (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfrcpp:v:20:y:2012:i:3:p:293-306

DOI: 10.1108/13581981211237981

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