Widespread ignorance rife for Basel II compliance

Board directors at 50 top financial institutions displayed worrying levels of ignorance when polled about their compliance with Basel II regulations.

A staggering 48 per cent were unsure if their bank will be compliant with the regulations by the 2006 while two per cent categorically stated they will not meet the deadline.

Basel II dictates a required level of risk management compliance for banks and is intended to limit the threat of financial crisis, malpractice and instability worldwide. While you might therefore be forgiven for thinking banks would be on top of the situation, it appears that is pretty far from being the case.

However, Richard Sykes, chairman of sourcing consultancy Morgan Chambers and a regular speaker on issues of Basel II compliance, is sceptical about the findings of the research, claiming banks will have no choice but to comply.

"There's no two ways about it," said Sykes. "This is going to happen - there can be no doubt about that."

Sykes suggested that what banks say, in response to questioning such as this, may differ from what they are actually doing behind the scenes. "In my experience there is often a lot more going on than banks would be prepared to admit," he said.

However, he is confident that "market pressures" - increased by greater transparency across all companies within the sector - and the ratings agencies breathing down banks necks will mean they will comply, whether they know it now or not.

The research also found that despite predictions from the likes of analyst house Datamonitor that Basel II compliance issues will drive IT spend in the financial sector, 24 per cent of respondent to the survey said they believe software is 'not at all important' for their compliance strategy.

Laurence Trigwell, industry director, financial services EMEA at Cognos, who commissioned the survey, said in a statement: "Although it seems that the Accord seems some way off, time is running out for banks to comply with Basel II so the level of misunderstanding at such a senior level is quite worrying.