An investigation into the best approach to the implementation of Basel II in Swaziland

  • 343 Views
  • 56 Downloads

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

After the exposition of the Basel I Capital Accord weaknesses, the advent of the Basel II Capital Framework profoundly redefined global banking regulation and risk management practices. Many African countries had been lethargic on the migration to Basel for various reasons, amongst many being lack of skills and infrastructure. The purpose of this study was to investigate the prospect of migrating from the 1988 Basel I Capital Accord to the Basel II Capital Framework and to analyze the best approach to the implementation of the new framework in Swaziland. This was a qualitative study conducted using semi-structured interview among risk managers from the four banks operated in Swaziland. The researchers also analyzed internal regulatory documents to determine their suitability and compliance to the Basel II standards. The results showed that the adoption and implementation of Basel II are a complex and resource intensive undertaking that requires strong commitment from policy decision makers. The complex models used in the later Basel capital accords have the potential to be unattainable for emerging economies, while the risk of doing business is ever increasing with exotic banking products being introduced. Background work remains the daunting outstanding undertaking that the Central Bank must get ready to do and complete timeously and efficiently. Implementation prerequisites include aligning supervision practices with the 29 Basel Core Principles for Effective Banking Supervision, revising the current legislation to address existing regulatory weaknesses and recruiting and training human resources for efficient and effective rollout.

view full abstract hide full abstract
    • Figure 1. Basel II architecture
    • Figure 2. Swaziland banking industry by total assets, total advances, total deposits and total capital
    • Figure 3. Industry capital adequacy levels
    • Table 1. Assessment of the current regulatory framework
    • Table 2. Institutional awareness
    • Table 3. Pillar 1: credit risk and operational risk
    • Table 4. Basel II compliant policies