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Lebanese banks not yet ready for international standards - Experts say institutions should invest more to comply with Basel II (Daily Star)

Lebanese and Arab banks are not yet ready to implement tight international banking standards, which require higher capital and less risky credit by the end of 2006, speakers at a bank conference said Tuesday.

Speaking at the opening session of a three-day conference on banking operational risk, Arab bankers said financial institutions in the region need to invest more to comply with the rules of the Basel II agreement.

The central bankers of the G10, the 10 biggest industrial countries, drafted new banking rules in 1998 known as Basel II, aimed at raising international banks’ capital, lowering risky credit and increasing transparency to limit fin- ancial crashes. “Arab banks have no choice but to comply with these rules if they want to continue operating in international markets,” said Makram Sader, secretary-general of the Association of Banks in Lebanon. “Time is running out as the 2007 deadline for implementing the accord approaches.”

Fouad Shaker, secretary general of the Beirut-based Union of Arab Banks, said the Basel II accords have also increased the pressure on banks and monetary authorities in the Arab world. Central banks will have to improve their human and capital resources to control and assess the risks banks are taking.

Arab banks could also get lower ratings from international credit agencies if they fail to comply with the Basel II standards.

Marwan Nsouli, a vice-governor at the Lebanese Central Bank, said the Basel II recommendation will require greater investment in technology and human resources, particularly among small- and medium-sized banks. “This will create greater financial costs in small and medium-sized institutions, the same banks which currently are in the high risk category,” said Nsouli.

The Lebanese Central Bank raised last year’s minimum capital adequacy ratio of local banks to 12 percent, from eight percent, to comply with Basel II. The average capital adequacy ratio of Lebanese banks stands at around 18 percent.

Beirut 16-06-2003
Dania Saadi
The Daily Star



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