Monday, July 10, 2006

Basel 2 - Why is it a hot topic in Sri Lanka

Why is Basel 2 important to Sri Lankan companies?


Sri Lanka has set 1 January 2008 as the target date to implement "Basel 2". The key reason for adaptation seems to be the "credit ratings". Like all companies around the globe, Sri Lankan companies do need to borrow for growth (and other reasons) and would like to avoid paying high premium interest rates. Sri Lanka does not seems to have a decent credit scoring system and instead credit officers seem to rely on assessments made with their minds. The state of the mind of the individual at the time of application assessment having significant influence in the decision making! What happens if s/he got out from the wrong side of the bed that morning!. OK! We are all professionals and this is bit of a dramatisation of the thinking process, or is it?


According to Joan de Zilva, Director of Bank Supervision of Central Bank (as reported on The Sunday Business Leader):



Credit officers in banks are lazy!! There is nothing to say that the loan will be repaid. Banks must veer off from collateral lending to cash flow lending.



According to Ranjith Samaranayake, of Commercial Bank (as reported on The Sunday Business Leader):



Basel 1 was too simple and was confined to the accounts department, with the rest of the business not included. Basel 2 is much more than an accounting exercise. The credit and risk managers must now be involved.



As far as ebdex is concerned, we are doing all we can to ensure there is a full audit trail on all transactions. In terms of presentation, a simple icon is provided against each transaction, which displays full audit trail associated with that particular transaction. In addition, we are discussing about providing an event log at System Administrator level that will show every action taken from System Administrator to every User of the ebdex Document Exchange.


I welcome any thoughts you have on provision of compliance within an document exchange environment, as well as any comments you may have on Basel 2 and Sarbanes Oxley.

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