Better risk management system for banks, financial
CB to implement Basel 11 advanced approach
The Central Bank (CB) will implement the Basel 11 module One advanced
approach and the remaining two modules to foster the integrated risk
management system in banks and financial institutions in the country,
At present, all banks and financial institutions conform to the Basel
1 credit and market risk management system and the CB has drafted a
five-year road map from 2008 to 2013 to implement and facilitate the
Basel 11 international risk management framework, a spokesman for the CB
Bank Supervision Department said.
The Basel 11 first module outlined the assessed credit risk,
standardized the market risk measurement methods and the operational
risk to indicate operational risk approaches in those institutions.
However, all banks and financial institutions are now planning to
implement the advanced approach in Basel 11.
Therefore, 22 commercial banks and 14 specialized banks are now in
the process of investing in it. The Basel 11 subsequent modules
stipulated that all financial entities should maintain a database of
past records and have a validated statistical model to have a strong
capital adequacy ratio and to control risk in banks and financial
institutions in the country.
Chairman, Hatton National Bank (HNB), Rienzie Wijetilleke said they
are strictly following the Central Bank rules and regulations and the
HNB is now in line with them.
He said that Sri Lanka is still an emerging market and this type of
advanced approach is needed to create a stable banking system in the
If all banks and financial institutions uniformly follow this system
we will have a stable banking system, he said.
Chief Executive Officer, Seylan Bank, Ajitha Pasqual said they have
made an investment to implement the Basel 11 simple risk management
systems such as credit risk, market risk and operational risk and in
addition is planning to adopt the advanced approach. Pasqual said that
they have already implemented the individual credit rating model to rate
their credit customers internally in the bank, which is in line with
The bank’s corporate risk is progressing well and they are working
with Ernest and Young, while the operational risk is based on the basic
Chief Financial Officer, Bank of Ceylon, Saliya Rajakaruna said the
Bank is working towards adopting the Basel 11 advanced approach and will
deploy all systems in place well ahead of the stipulated time.
Once Basel 11 is implemented it will be a better risk management
system for banks and financial institutions to keep a low capital.
This will also pave the way to mitigate individual risk as well.
The G 20 countries are following this method and the Basel Committee
on Banking Supervision is adopting this integrated risk management