Basel II Initiative - Bank Sentral Republik Indonesia
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March 29, 2017
  1. During parallel run, banks submit reports offline
  2. Updated calculation of market risk according to Basel II
  3. Banks may use this approach provided that they meet the prescribed requirements and have approval from BI
  4. Includes interest rate risk in the banking book, reputational risk, strategic risk, etc.
All the above deadlines are targets for completion
:: Pillar 1. Necessary Steps:
  • National Discretion : (i) Supervisory authority must establish definitions, approaches and thresholds for implementation; (ii) Establish prudential standards and rules for compliance
  • Quantitative Impact of Basel II : (i) Provide operational framework for banks; (ii) Measure potential impact on capital
  • Assessment of Bank Practices and Readiness : (i) Assess readiness, gaps and implementation challenges; (ii) Hold bilateral dialogues
  • Prepare Banks for Implementation : Encourage banks to make the necessary improvements for use of more sophisticated approache
  • Development of Supervision/ Examination Guidelines : (i) Prepare qualification guidelines for advanced approaches; (ii) Prepare guidelines for examiners in evaluating bank compliance with standards
  • Approval Process : (i) Communicate transition process for the approaches to be used; (ii) Facilitate progress in the implementation plan
  • Exchange of information among supervisory authorities : (i) Facilitate crossborder supervision; (ii) Hold dialogues on challenges and obstacles in implementation
:: Pillar 2. Supervisory Issues, key issues for which adequate preparations are essential:
  • Do banks already have a suitable internal capital adequacy assessment process (ICAAP)? How does one define a ‘sound’ framework?
  • How should the supervisor implement the supervisory minimum standards when assessing the quality of a bank’s ICAAP?
  • Are there standards for measuring ‘other material risks’?
  • How do supervisors ensure the objectivity and transparency of the Pillar 2 process?
:: Pillar 3. The following are some necessary steps:
  • Assess the gap between current and Basel II disclosure requirements
  • Upgrade the supporting infrastructure for transparency
  • Review overlaps between accounting and Basel II requirements
  • Identify various preconditions necessary to ensure that improvement in scope and quality of disclosure will promote market discipline
  • Formulate a method for assessing the effectiveness of Pillar 3
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