Impacts of Basel Ii Requirements on Fis in Malaysia

Topics: Banking / Pages: 55 (13634 words) / Published: Jul 7th, 2011
Impact of Basel II Requirements on
Financial Institutions (FIs) in Malaysia

Haida Rozilah Hamzah
Asia e University
MBA - September 2010 Abstract
The purpose of the study was to examine the impact of Basel II’s Risk-Weighted Capital Adequacy Framework (RWCAF) on financial institutions in Malaysia in order to develop a strong financial capacity and efficient risk management profile. Specifically on the adoption of more advanced approach for quantifying the Risk-Weighted Assets (RWA) on market risk and other factors in general for Risk-Weighted Capital Ratio (RWCR) computation. The study also examined the factors and strategies applied by the financial institutions that will impact the results of the Market RWA. The study involved 6 financial institutions listed as the 10 top and largest banks in Malaysia. The financial institutions’ financial report as at June 2009 and 2010 and the annual report of 2009 and 2010 were the main sources of the data, information and result to conduct the study. The results shows that the RWCR results to comply with the advanced approach has been decreased by 0.32%, high Market RWA charge decreased the RWCR results and portfolio classification, approach adopted to quantify capital charge, types and breakdown of the financial instrument holds by the financial institutions influenced the results of Market RWA charge. This study has shown that the Basel II requirements impact the results of the RWCR computation of most of the financial institutions and influenced the financial institutions’ strategies of quantifying the Market RWA for computing RWCR. Therefore, in view of the growth of the emerging markets and the benefits of Basel II, financial institutions need to adapt and customise Basel II requirements to their own advantages. Acknowledgement
I am grateful to Allah S.W.T as I manage to complete the project paper in time and heartily thankful to my supervisor, Professor Dr. Mohd Adam Bakar, for his feedback on the scope



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