PMA Begins Implementation of Basel II Requirements for Capital Adequacy and Risk Management
Online with the requirements of the Basel Committee on Banking Supervision known as Basel II, the PMA has issued new instructions to banks operating in Palestine on the minimum capital requirements and risk management. This comes as part of the efforts to finalize a bigger project launched by the PMA at the beginning of 2013 to implement capital adequacy and risk management requirements as per Basel II. Adherence to these instructions is considered an essential step to preparation for the implementation of Basel III, intended to promote competence, capital adequacy, governance and risk management in the banking system aiming to fostering financial stability in Palestine.
H. E. PMA Governor Azzam Shawwa said that, PMA has fulfilled the preconditions for the implementation of Basel II and Basel III concerning the legal and regulatory banking environment to ensure the preparedness of banks to implement these requirements, the PMA initiated in 2013, in cooperation with the World Bank, the project for the implementation of Basel II and its updates by all banks operating in Palestine. Taking into account the unique Palestinian situation, the project contributes to the promotion of capital adequacy for the banks; fosters their ability to withstand risks associated with banking; safeguards the soundness and stability of the banking system and protects customer funds. Governor Shawwa pointed out that this project will also reinforce governance and risk management of the Palestinian banking system, in line with international best practices.
Basel II requirements hinge on three main pillars: firstly, minimum capital requirements; secondly, supervisory review of capital adequacy and risk management and thirdly, market discipline and disclosure and transparency requirements.
In implementing Basel II requirements, the PMA advocated three basic principles: simplicity of methodologies used; gradual application to enable the banks to implement the instructions smoothly without hindrances, and continuous communication with bank managements. PMA regards communication fundamental to the successful implementation of the new regulatory framework, owing to the wide and comprehensive Basel II scope which necessitates that all parties attain full understanding in order to achieve the desired results.