Basel 2 and Information Technology Systems

Abstract

The challenges created by the Basel reform in the field of information technology (IT) systems are tremendous. Of course, the magnitude of the efforts and investments that will have to be made by banks will depend on their current developments in risk-measurement and risk-monitoring tools. But even more advanced banks will need to make significant adaptations because an important part of the data necessary for Basel 2 are not currently available in their systems. This can be seen, for instance, in the QIS 3 exercise, where even large banks have had problems in finding the required data on collateral values. Basel 2 imposes ways to value certain kinds of credit risk mitigants that are different from the methods currently in use.