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Basel III - Impact on Indian Banks

Although, under Basel II, Indian Banks are adequately capitalized well above the minimum regulatory threshold of 9% Capital Adequacy Ratio, my study has highlighted the fact that in case Basel 3 changes get implemented in India, from the stipulated date in 2012, their would be substantial reduction in the Tier I Capital of Indian Banks with the % reduction in Tier I capital as high as 25% for IDBI,Central Bank, while a reduction range of 10-15% for SBI, PNB,Bank of India, Union Bank ICICI,Kotak,Yes Bank etc.

Pricing Services in Public Sector versus private Sector

a. It is usually more difficult to compare services to a product and the guidelines for Procurement of Services is a problem in PSU's and Govt. purchase not only in India but across the world. In fact this in itself is a HUGE risk as the Services Sector now approaches or exceeds 50% - as opposed to Manufacturing and Agriculture - in most Economies including India.

Typical Top 10 risks for Insurance Company

To provide an insurance perspective, here is the list of top risks that are usually identified at an insurance company after a detailed risk assessment session.

Regulatory Changes/Actions
Customer relations/Misselling
Key skills attrition
Investment Performance
New Products approval
BCP/Disaster/Crisis situations
Inadequate IT capability
Sales & Distribution limitations
Model risk

Major Indian Private Sector Banks, HDFC Bank, ICICI Bank and Axis Bank - Running A Huge Nation-wide Money Laundering

Cobrapost's Shocking Mega Expose: Major Indian Private Sector Banks, HDFC Bank, ICICI Bank and Axis Bank, Are Blatantly Running A Huge Nation-wide Money Laundering Racket “
(www.cobrapost.com )

While we have not verified the truth in the above instance, the latest development relating to Anti-Money Laundering, KYC violations is a real cause of concern.

Canada’s Bank Regulator Targets “Operational Risk” in 2013

Quoted in the Wall Street Journal recently, "Canada’s top financial watchdog intends to press the big banks next year on how well prepared they are to deal with so-called “operational risk”–one of the most difficult risks to protect against."

We now know that operational risk is a major risk factor, a silent killer in its own way. It does not damage a limb, or an organ, it goes for the kill straight away.

Largest Financial Services Fines

So, who is the top on the list of Regulatory penalties and Fines. IT is none other than HSBC. It was fined US$ 1.9 Billion on Money Laundering lapses. ITs activity in Iran resulted it dear. I would not say that the fine was a surprise given that if HSBC chose to operate in Iran, it was very well aware of this lapse.

Next comes the Libor manipulation fine for UBS. Infact, Libor related fines will continue for sometime. we can expect this list to become Top 100 fines soon.

Overall, most of the fines relate to operational risk, Compliance issues and AML/KYC.

Regulation Takes a breath

Things are not so solvent in Basel. In other words, Solvency II and Basel III are both likely to get delayed compared with original timelines.

"The European Commission (EC), regulatory agency for the European Union (EU), announced on December 3 that it will not comply with a previously-established deadline for Basel III adoption of January 1, 2013."

Social Media Risk and Reputation Risk - How one feeds into the other

Reputation and Reputation Risk

It is a well known fact that possibly one of the most valued asset for any organisation is its reputation. The brand that has the ability to generate future revenue business for the entity. Firms with larger reputation values find it easier to find customers and sell to these customers. So, we can freeze on one concept as part of this discussion. The concept that Reputation is the most important element of a company and loss of reputation is equivalent to loss of potential business and even the cause of bankruptcy.

Social Media

Flash Crash = Fat Cash

Flash Crash = Fat Cash

So, we all know Flash crash it. Ask anyone and the answer you are likely to get back is that it is something that goes wrong due to which stock price crash or increase significantly and reverse out at the same speed. Flash crash are usually due to erroneous trades or "Fat Finger errors" where trades that were not intended are released to the Stock exchange and executed.

But this discussion is not about why it happens, or what happens, but rather what are the consequences of it.
Three obvious consequences are as follows
1. Media enjoys it and publicises it a lot

Risk Management Training

Risk culture is something that cannot be build overnight. It is not something for which you can hire a consultant and then make a magical transformation just like that.

Research has shown that one of the most effective elements to improve risk culture is continuous and relevant risk managment training. Operational risk is predominantly people and the more training that is imparted to them, the more likely the related operational risk are going to be mitigated.

To learn more about how Riskpro can help with Risk Management training,please email manoj.jain@riskpro.in for more details.

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