New, pressing regulatory issues are an increasing concern for Thai financial institutions and Wolters Kluwer’s experts will focus on them at the “Thailand Finance & Risk Summit 2016” held in Bangkok today.
Risk data aggregation is one of the key topics to be discussed at the seminar. Basel Committee on Banking Supervision (BCBS) 239, for example, aims to improve data consistency and clarity in line with its 14 principles. Nowadays, banks are connected by an international network of different computer systems which could make risk assessment of the whole bank difficult. The aim of BCBS 239 is to enable better assessment of risk and profitability at the bank’s group level.
“The BCBS 239 standard on risk data aggregation has already come into effect January 1, 2016. From our discussions with banks in Thailand, we see that many have not implemented this standard,” comments Soon Kit Tham, Risk practice director, Asia Pacific, Wolters Kluwer. “Regulators in the region have asked banks that haven’t complied yet for an action plan to do so. This is clearly urgent as regulators have witnessed that the benefits outweigh the investment costs for banks through empirical studies by Basel. Today’s event is a chance to focus on the BCBS 239 objectives as well as how banks can leverage on an integrated view of their business to improve spread margin with this standard.”
Another area of focus is International Financial Reporting Standards 9 (IFRS 9) which kicks in January 1, 2019 in Thailand. This new accounting standard carries with it a whole set of changes including changes in classification, hedging and the adoption of an expected credit loss model for assessing impairment.
“This new standard is causing much concern among Thai banks. In particular, the expected credit loss model will impact banks’ profits. According to an Asia Pacific survey we just did in May 2016 among 700 respondents, many expect profits will be impacted. Provisions could go up by about 40% on average,” noted Matthias Coessens, vice president, Finance and Performance, Asia Pacific, at Wolters Kluwer. “In addition, because most banks in Thailand have not implemented the Basel Internal-Ratings Based (IRB) approach, banks will probably have to revisit their existing credit scoring practices. This will take time as they need to gather data on credit scoring, defaults, and various financial stress scenarios. The key is to start on time.”
Chris Puype, managing director, Asia Pacific, Wolters Kluwer Finance, Risk & Reporting added, “In our interactions with Thai banks, we see increasing queries on the standards of BCBS 239 and IFRS 9. This prompted us to focus on these two topics in our latest seminar. Many new regulations, including these two, require a lot more re-organization and integration of banking operations. We believe it’s vital that banks devote time to think holistically about strategic management solutions.”
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