An Evaluation of the Risk Management Practices of Commercial Banks in North Cyprus

Kesjana Halili () and Hatice Jenkins
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Kesjana Halili: General Department of Budget, Ministry of Finance, Albania

No 2010-01, Development Discussion Papers from JDI Executive Programs

Abstract: The important role that an effective risk management system plays in ensuring banks’ profitability and continuity is widely proven. The Basel II guidelines, which will soon be applied internationally requires that banks and other financial institutions have a comprehensive risk management framework in place in order to effectively deal with all the risks inherent in banking. This study evaluates the risk management practices of banks in North Cyprus. Given the absence of a political settlement in Cyprus where the Turkish Republic of North Cyprus is not recognized by any other country except Turkey, banks in North Cyprus do not feel obligated to adopt the principles of Basel I and Basel II. Even after a major financial crisis between 2000 and 2001, a significant number of banks still do not have internal auditors and do not conduct integrated risk management. Our survey found that, in 2006 only 43% of the banks in North Cyprus were aware of Basel II, while the rest have almost no knowledge about it. A settlement of the Cyprus problem would require the banking sector in North Cyprus, to come into compliance with the Basel II principles and operate in a more prudent fashion.

Keywords: Risk management; banking risks; risk management techniques; banking (search for similar items in EconPapers)
JEL-codes: G21 G32 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2010-01
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