Rolling out change
Many international Rabobankers will have participated in the BIS II projects that have been rolled out
around the network in recent months.The Word looks at what BIS II means for Rabobank International (Rl),
why the changes are needed and how the implementation of new systems will support solvency.
Otherrisks
serve as a similar loan to an unrated
and therefore higher-risk company.
The changes now proposed in BIS II
will facilitate greater differentia-
tion. As an international bank, we
will now be able to apply the ratings
of external agencies or our own
ratings when setting risk weightings.
The new regulations also take into
account other types of risk. In the
past, these had been covered inade-
quately or not at all by BIS I.
Reserve capital for operational,
interest-rate and liquidity risk was
included implicitly in capital re-
quirements for credit and market
risks. However, the new regulations
recognize the impact operational
risk especially can have on the
global financial system. For this
For 30 years, international banks
have operated under the so-called
BIS I Accord (see sidebar). Although
useful, the regulations contained in
BIS I were often criticized as too
general; they often failed to reflect
and incorporate the actual risk borne
by the bank. Basically, BIS I, or Basel,
assigned only five risk weightings -
0%, 10%, 20%, 50% and 100%.
I he weightings were crucial as they
formed the basis for caleulating how
much reserve or BIS capital a bank
must hold. 8% was established as
minimum overall. This meant that,
for example, a 100% weighting 011 a
100 million loan to a private com
pany required the bank to hold 8
million in reserve. As all companies
carried the same weighting, a loan to,
for example, an AAA rated company
would require us to hold the same re-
Ben Vergouw - increasing RI's competitiveness
in the global market
28 I Rl The Word
