Risk Management, PRMIA

*) Australia and New Zealand Banking Group (ANZ) was awarded both IRB for credit risk and AMA approach for operational risk.

*) Commonwealth Bank of Australia (CBA) also IRB for credit and AMA for operational risk

*) Westpac Banking Corporation IRB and AMA as well

*) Macquarie Bank Foundation for credit risk and AMA for operational risk

*) Bank of Western Australia AMA for operational risk

*) National Australia Bank AMA for operational risk

So what happens to those that do not make the credit risk accreditation? Well they have to stay on Basel I. Quite Interesting; so Australias largest bank, National Australia Bank has been approved for AMA but must stay on Basel I for its existing capital arrangements. One does ponder how this is going to be calculated because under Basel I operational risk was not part of the program and was `overlapped` on the other risk disciplines. There are two ways out of this situation; AMA will be a parsimonious exercise for the bank or APRA will create some `special` capital calculation for them, highly unlikely, perhaps we can expect snow in the Middle East first.

Apparently Dr John Laker said that ``the process of applying for Basel II AMA has led to significant improvements in risk management systems`` and personally I would agree with him, before Basel II many of these institutions didn`t have a formal loss data process outside write-off to the GL.

Macquarie Banks approach is certainly well planned and while it is a power house investment bank in Australia its client facing operation is relatively private. It does not run the huge processing centres or massive retail portfolios that the other Australian banks control and it follows that the leap to AMA would have been quite straight forward, then in the same token, return from risk weights on retail credit by applying IRB would be a modest kick-back for the marginal efforts that are needed.

ANZ has certainly been an early adopter of operational risk systems with Dr Mark Lawrence`s scorecard approach some years back and they might be able to share some of their ability with the recent acquistion in South East Asia to bring that financial institution up to speed for Basel II.

The interesting omission from the list is St George, a massive retail lender in New South Wales. No IRB, No AMA, nothing just Basel I. Quite amazing what could have gone wrong there especially as only a year ago Incisive Media awarded Group Risk at St George WINNER : Op Risk executive of the year, so we were all expecting that bank to make it over the line.

The full media release can be found at APRA releases Basel II prudential standards