National Bank of Malawi implements new system to comply with Basel II regulations
The National Bank of Malawi will implement a new system to facilitate compliance with Basel II requirements.The National Bank of Malawi will implement a new system to facilitate compliance with Basel II requirements.
The Bank has chosen Misys’ Global , which according to the company will help consolidate its liquidity management position "across its finance, treasury and corporate governance departments".
Isaac Kanje, Head of Risk at the National Bank of Malawi, added that the product will contribute to improving the bank's risk management framework as a whole.
"We are confident that Misys will deliver an excellent solution in time for us to be Basel II compliant by 1st January 2014, as required by the Reserve Bank of Malawi."
The Basel II reforms urge banks to quit the Cooke ratio to adopt the McDonough ratio.
According to the Cooke ratio, the bank's stockholders' equity divided by the credit commitments have to be higher than eight percent.
The McDonough ratio uses the probability of default and the expected loss from default to assign varying weights to assets in the denominator.
It sets its benchmark at the same percentage value as the Cooke ratio, but the latter does not give different weights to borrowers of differing quality.
Basel II is therefore likely to stimulate the growth of banks in Malawi by allowing them to refine their risk assessment system and evaluate more precisely their capital stocks needs.