The implementation of Basel II is an important practice that is expected to improve the transparency of the Gulf Banks. It will also help regional banks improve their risk management systems and focus more on quantitative information and analysis.
Mr. Talal Abu–Ghazaleh, the Vice Chairman of the UN Information and Communication Technologies Task Force finds that GCC Banks should focused on the three basic supporting elements that allow the banks and regulatory and supervisory bodies to better assess the risks faced by these banks. The first is to specify the minimum requirement for capital adequacy in order to further develop the measuring methods mentioned in the 1988 Accord. The second is the supervision by the banking supervisory bodies on capital adequacy and the internal assessment norms, while the third foundation is the market system that offers vast opportunities for effective disclosure that result in more secure banking operations. He also mentioned that improving the internal systems should be the first priority before thinking about international integration.
The implementation of this practice in the Gulf faces unique challenges that are common and particular for the gulf countries. One of the main challenges is to find reliable regional data on corporate defaults. Another issue is relevant to the Islamic principles that somehow are not matching with Basel II descriptions and requirements. In the other side, the money laundering and the financing of terrorism are two of the most serious challenges currently faced by the Gulf banking sector as noted by H.E. Sheikh Salem Abdul-Aziz Al Sabah, Governor of the Kuwait Central Bank.
These complications made central banks work thinking of steps approach and the need to work in the lowest requirements and ...