Banks form new firm for Basel II data needs

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Mumbai, Oct 9: In a bid to get ready for post- Basel II challenges, Indian banks are forming a new corporation to meet data requirements and curb losses due to absence of requisite information.

Known as Credit Operational Risk Data Exchange (Cordex), the new corporation will ensure the creation of a data pool consortium for Basel II implementation by the banking industry. Indian Banks’ Association (IBA), in association with some major banks, are currently working on the formation of this new corporation.

Confirming the development K Ramakrishnan, CEO, IBA, said that the corporation, once operationalised, will collect data, assimilate it, sort and present it in an appropriate manner as mentioned in the guidelines. Data collection and presentation was seen as a major challenge in the road towards Basel II implementation.

Now, Cordex will take care of the operational risk part of the Basel II norms, he explained. Ramakrishnan said some of the major banks have already joined in the plan.

These include Bank of Baroda, Bank of India, Canara Bank, Central Bank of India, IDBI, Indian Overseas Bank, Punjab National Bank and Union Bank of India. The IBA has now applied before he registrar of companies seeking registration of the proposed corporation.

Data collection will be done by the corporation at the industry level based on the losses relating to operational risks incurred by the banks. Once the actual amount of loss is determined on the basis of the data, it will be made available to any of the banks.

However, IBA sources point out that the proposed corporation is still in the formation process andhence a number of perational issues are yet to be addressed. One of the issues, which is yet to be sorted out, is the provision of the requisite software solution for the corporation.