Bank Indonesia (BI) prepares implementation of Basel Accord III to boost up prudent macro banking despite the implementation Basel II is applied by 2012.
Currently the G-20 countries are discussing the new bank capital standardization. This is owing to the fact that th eexisiting capital regulation cannot absorb yet the risk of 2008 financial crisis.
Deputy Governor of BI Halim Alamsyah said optimistically the implementation of Basel UU will be accomplished by 2012 along with the finalization of Pilar I implementation. That encourages the central bank to prepare Basel III.
"Based on schedule, we agree to implement Basel II by 2012. Thus for the next year will be Basel III realization noting that Basel III is internationally carried out. Meanwhile, Basel II is running in Indonesia," he said in press conference of G-20 result yesterday.
Considering the realization of Basel II, BI now has pushed the implementation of Pilar I finalized by mid this year before implementing PIlar 2 with the next risk component.
In Pilar 2, bank will still face little difficulties as it should have individual calculation. But it should be accountable on the basis of the central bank assessment.
"After Pilar 2, it would be even harder. Pilar 2 allows bank to take their risks. Then the risk should be on regulator (BI) approval," he said.
Basel II is the improvement of Basel I made in 1988. The regulation provides a more sensitive frame for capital calculation to the risk and provides incentive to the soaring bank risk management implementation quality.
The regulation highlights three pillars, risk-based capitalization calculation, supervisory review process, and market discipline.
After Basel II, it is necessary to continue the implementation of Basel III as the regulation is inseparable. "Basel II is micro prudence but Basel III is macro," he added.
On the occasion, Halim said now the G-20 countries discussed the new standardization of bank capital noting that in 2008 crisis, capital regulation failed to absorb the risk.
"The G-20 meeting in terms of finance sector reform, one of the discussion topics with more time consuming is about capitalization quality discussion and finance system liquidity quality. Both cut down the cyclical regulation effect," he said.
Dealing with the qualified capital, bank has definition on the capital in tier I or core capital. In the component here, it must have separated calculation with the overall capital raito.
As to him, the prominent issue on the meeting was about the standardization of tier I by 4-8 percent. Tier I for Indonesia is far higher that level as it is at 12 percent.
"There is 6-7 percent, but not many. If it is applied, there is only 1-2 banks to incracease tier I capital.
Thus we support the implementation ofG-20 decision here," he said.
Currently the CAR is tier I (current earnings, capital placement, and others) and tier II as hybrid capital from subdebt issuance. (Bisnis/hta)
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