Legislation «Basel» operating environment for banks

September 6, 2016
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I talked on several occasions, particularly in the words and lectures that I gave during Trasa Union of Arab Banks , About the need to take the privacy of Arab Banks conditions into account when applying the international legislation, including legislation «Basel 2 and 3».

We recognize that «the Basel Committee» subjected to international standards for the broad consultations with regulators and financial institutions before they are issued, however, it can not be for the Commission to accommodate all the comments and suggestions that link to it. Therefore, they usually give some flexibility on the application of standards both in terms of scale and in terms of deadlines.

We noticed one in particular through seminars and conferences held under the umbrella of the Union of Arab Banks or other authorities, that the fundamental aspect of the palaces is going on international legislation, including legislation «Basel», and limits their ability to accommodate the peculiarities and characteristics of countries where it is applied, which is that this legislation is not incorporation have explained and justified in theory in a comprehensive and integrated, ie they take the operational side rather than the conceptual and institutional side, what makes them linked to and affected by a specific operational environment is the environment that have been developed in which, while overlook other operating environments that will apply the properties. While the development of the conceptual and institutional framework for such legislation, making it the premises or guidelines are applied according to different banking environments.

Here we differentiate between legislation that are formulated at the level of each country, in this case should be subject to the operational environment which will be issued in, and between international legislation, which will be circulated to all countries, and here we must conceptual framework put her as guidelines In order take into account when applied to local operating environments for different countries when applied.

But if we look at the subject of banking legislation at the local level, we see that the banking environment is ultimately a social context consists of under control (banks), regulators (central banks), and the shareholders, depositors, creditors and the general public. Also, this environment is governed by a set of inputs such as technology and the human element of social and political, economic and cultural situation prevailing ... .etc.

For example, when the central bank to put any legislation on job banks, it inevitably will be affected by the technological infrastructure has in banks, banking and merit, and political and social situation, the economic and strategic objectives. These in turn are affected by the political and institutional structure of the country as a whole.

In addition, any defect or failure in one of the surrounding elements or some of them in turn will affect the banks of the legislation laid down an application by the central bank, and is likely to lead to a negative impact on another category, such as depositors in case of bank failures to remain able to pay He has liquidity.

Both the banks and the regulators look at the legislation and banking supervision in a different form the other. Banks consider legislation and interact with them from the perspective of maximizing profits, and increase the governor of lending and investment, and increase market share, and thus superiority over its competitors, and attract more deposits, and so on.

The priorities set by the executive departments of the banks to their goals you want to achieve from such legislation will vary depending on the culture of its Board of Directors and executive management, vision and philosophy albeit mostly involved in almost the same goals.

On the other hand, central banks look at the legislation, you develop from the perspective of the overall political and economic environment, the protection of the country, as well as to reassure the public to avoid panic and lack of confidence in the political and economic order.

Therefore, the regulatory bodies that put legislation should not be limited to the study of the achievement of the goals that look at it from the angle for even those banks expect to achieve as well. And not only that, but on the surrounding banks and that have already been mentioned, such as technological and human development and resources, social and political climate and the economic situation, in order to be successful provision of kits and its factors for the application of the legislation as much as possible operating environment familiarize central banks.

We conclude from the foregoing that the development of legislation at the local level should be seen as the operating environment, while at the international level should not focus on a particular operating environment, and should not restrict our consideration when placed on a set of equations and sporting rules and relationships and effectiveness to achieve a set of goals set by the authorities regulators, which could not be explained by one or two theories. It can not be justified on the back of only one officer, such as economic and operational characteristics of the environment, because it would be varying between one country and another.

When the supervisory authority in the country to apply international legislation such as the decisions of the «Basel» should be taught the application of this legislation in the context of the unique cultural features of the operating environment for banks in the country. In addition, the institutional characteristics within each country should be seriously considered by the banking supervisory authority, before the imposition of international legislation specifics in this country.

Adnan Ahmed Yousif