Basel II Compliance with OpenText Fax Solutions
Basel II provides a framework to promote the adoption of stronger risk management practices by the international banking industry to enhance financial stability.
Basel II is built on three pillars:
Pillar One: Sets minimum capital requirements
- Improves the capital framework's sensitivity to the risk of credit losses by requiring higher levels of capital for those borrowers thought to present higher levels of credit risk.
- Establishes an explicit capital charge for a bank's exposures to the risk of losses caused by failures in systems, processes or staff, or those caused by external events-such as natural disasters.
Pillar Two: Supervisory review
- Recognizes the necessity of exercising effective supervisory review of banks' internal assessments of their overall risks to ensure that bank management is exercising sound judgment and has set aside adequate capital for these risks.
Pillar Three: Market discipline enforced by greater transparency
- Requires greater disclosure of banks' financial status and their internal risk management procedures.
- Leverages the ability of market discipline to motivate prudent management by enhancing the degree of transparency in banks' public reporting.