1-
The basel committee
2- Basel I
3- Basel II
3-
BASEL II
•
Introduction
• The pillars of Basel
II
• Basel II, what consequences
for firms?
• The impact of Basel II
on western markets of securitization
• Basel II, what consequences for firms?
Several economic actors, especially the firms, have expressed
a fear at the time of the elaboration and the introduction of
the texts of the reform. All these fears have not been highlighted,
but a better knowledge, then, their interpretation allowed us
to better understand the consequences set by Basel II.
First of all, we should not expect the introduction of Basel
II to radically modify the relations between banks and firms.
Secondly, after a period of setting up, of observation, of understanding
of the new rules, new relations could then be established between
partners.
- For banks :
With Basel II, the minimum equity level required is still globally
stable, so the banks’ capacity to give credits will not
decrease.
- The generalization of firms rating procedures: the
bank allocates a category of defect risk that reflects the probability
of defects on the basis of the characteristics that the bank
can notice, such as: data of the account functioning, or non-financial
data like the internal organisation of the firm, countable ratios,
quality of the projected documents presented to the bank, or
even the management of external parameters (environmental risks,
customer risks)…
- The cost of the credit will then be more individualised:
it means that some people will see the conditions granted by
banks improve, other will have to pay more. Basel II regulation
will encourage the banks which were already rating to reinforce
the scale and the quality of their tools, by aiming at more
relevance and objectivity, and the banks which did not apply
it, to do it.
- The necessity of a better knowledge of the customers:
even if banks will probably not ask for more documents than
before, they will want to collect more detailed, complete and
transparent data from their customers.
-
For firms :
Two major questions about the access to credit (the granting)
and the price of credits (interests):
Basel II will speed up the setting up of rating models by banks
that allow a differentiation between high risk credits and low
risk credits. It means that there will automatically have a
component of the cost of the specific risk for each credit.
Consequently, if SMEs want to obtain a good rating from their
banker, they obviously had better present themselves in a positive
and transparent way and so to get ready for the new demands
of « Basel II ».
- Reinforce the relations with his business banking manager.
It will be more than never necessary to better communicate with
his banker, by pointing out his main strengths, but also by
identifying the weak points and the strategies to change them.
The decision sin terms of credit not being automated at 100%,
the role of the banker remains important, the dialogue and the
taking into account of elements other than financial ones should
not be neglected.
You should not hesitate to ask him questions about the setting
up of Basel II, what are the main points in a file as well as
the element of improvement to bring within your own organisation.
This better knowledge of the components and the fact of being
attentive to some indicators influencing the mark of your firm
can then allow a reflection on the improvement of the indicators
of your own rating.
It is predicted for SMEs to receive a more favourable treatment
than today. Therefore, the smallest SMEs will be able to be
ranked in retail clientele, which should concern about 90% of
French firms.
Firms will then want to introduce themselves under an angle
appropriated to the closest vision desired by the banker, some
kind of «centre of excellence ».
Some firms could consider Basel II as an opportunity. Indeed,
among banking establishments, « Basel II » offers
a frame to improve the credit risk in a more varied way and
more objective.
For some others, that do not receive a good rating or that are
not ready to make any efforts to improve their situation could
then expect a rise of the credit costs.
Firms have to get used to the idea that « rating »
will soon or later become an incontrovertible tool in terms
of credit granting. As it is indicated above, this approach
will be based on an entire bundle of essential « quantitative
» and « qualitative » indicators.
