Malaysian banks will adopt a two-phase approach in complying with the Basel II Capital Accord, says Bank Negara Malaysia’s governor. The first phase will begin in January 2008 when all banks are expected to adopt a standardised approach to credit risks and a basic indicator approach to operational risks.
In the standardised approach, credit exposure is weighted based on a recognised external credit rating. It is relatively less complex and less demanding than the internal rating-based (IRB) approach, which only willing financial institutions will migrate to in phase
Two, which will begin in January 2010.
Banking institutions would be required to submit to Bank Negara parallel calculations of capital adequacy on a monthly basis for one year prior to the implementation of the standardised approach.
