The use of ICT in leveraging basel II implementation in Kenyan banks

Abstract

Basel II is the second of the Basel Accords which are recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision. The implementation of the Basel II framework in Kenyan banks is moving at a very slow pace. This has undeniably, affected the efforts of the banks to comply to international best practices standards. The major reason is the lack of development of proper systems/frameworks for realising Basel II objectives. The project analysed 45 professionals through use of a questionnaire, data recording and direct interviews. Data was presented through the use of charts and tables. The data touched on the respondent profile, employee experience, department and configuration of ICT to handle Basel II. This thesis examines the use of an ICT framework in the implementation of the Basel II in Kenyan Banks. The aim is to assess the critical ICT challenges experienced in the implementation. of Basel II, the current ICT implementation in place and propose an ICT framework that can leverage Basel II implementation in Kenyan banks. The study finds that the major challenges comprise the inability to provide consistent and correct data over time as this data is obtained from different IT systems and data owners, non-automation/ partial automation of some processes, lack of comprehensive historical data and inadequately trained human resource. Therefore, Kenyan banks will require technical assistance in order to effectively implement Basel II and consequently comply with the international banking regulatory standards of best practices. The analysis of the feedback research from the research reveals that there is need for development of clear guidelines, techniques and framework which ensures ICT enables Basel II implementation in Kenyan banks. The thesis recommends a guideline ICT framework that will leverage on Basel II implementation in Kenyan banks. This project proposes that a solution can be achieved by the use of ICT framework that supports the requirements of Pillar 1, facilitates compliance of Pillar 2 and supports the comprehensive reporting requirements of Pillar 3. Basel II provides for basic, standard and advanced approaches, with specific incremental capital adequacy, qualitative and quantitative requirements. IT is most relevant to the quantitative and qualitative requirements, which are risk management, control and governance practices.