With Basel II set to come into force in 2007, the CML admitted the implementation of the foundations into lenders’ business plans would have to be evolutionary as they integrated the regulation into their operations.
However, the CML stated that lenders who were slow to implement the changes or were less dedicated to them would suffer, with advanced lenders able to undertake competitive advantages as a result of lower capital requirements, and by using greater risk measurement and management.
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A spokesperson at Nationwide, said: “We anticipate that Basel II will have an impact on lenders and have had a team in place to look at how it will affect us.”
Martin Ellison, business leader at Britannia, added: “The main benefit of the internal ratings based approach is to help the Group better understand, and quantify its risks both now and to understand how they may change in the future. This will enable different areas of our business to make more informed decisions, so safeguarding members’ money.
“A second benefit is to understand the capital required to cover these risks so the Group can hold the right amount of our members’ profits.”
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