The Reserve Bank of India has told domestic banks to start reporting aspects of Basel III liquidity strength measures from June this year – ahead of the 2013 reporting timetable outlined by the Basel Committee
The Reserve Bank of India has told domestic banks to start reporting aspects of Basel III liquidity strength measures from June this year – ahead of the 2013 reporting timetable outlined by the Basel Committee
The Reserve Bank of India (RBI) has instructed Indian banks to supply data on putative liquidity coverage ratio (LCR), net stable funding ratio (NSFR), LCR by significant currency, and a statement of available unencumbered assets from the start of this year. Additionally it has asked banks to provide a statement on their bond spread movements compared with their share price in order to monitor early indicators of systemic risk, according to Kuntal Sur, a director of risk management at Deloitte in Mumbai.
"The RBI wants to monitor if the bond spread is widening. If a bank's bonds are trading higher compared with its peer group then this could signal a decline in asset quality or market perception could deem that the bank is risky," he says.
Sur says the earlier reporting trial run is so that the RBI can understand the liquidity requirements of Indian banks. "The RBI won't punish firms for having the wrong information in the first quarter. Some public sector banks and smaller private banks might be working with old reporting tools and may need to update their systems so this give banks a chance to assess their capabilities before the whole process starts for real," he says.
But Satyendra Shah, chief manager of credit risk at state-owned Indian Bank in Mumbai, says his firm is confident of meeting the RBI's requirements. "We will be in a position to comply. In terms of management information there is no problem for us as everything is on computer now - we have a treasury system and we generate ALM statements so we can do this on a real-time basis," he says.
