To facilitate the adoption of Basel II the central bank has directed that the processes should now be part of Internal and External Auditors' work plans.
"Banking institutions have made progress in implementing the revised capital framework. Observations made during on-going on-site examinations are that internal systems for banking institutions are showing greater stability as banks continue to upgrade their systems.
Basel II is a set of banking regulations which are used to regulate finance and banking internationally.
It attempts to integrate
To this end the RBZ has adopted a gradual approach to Basel II implementation in order to allow for a smooth transition from the current system to the new approaches.
Basel II promotes the safety and soundness of banks and fosters sound risk management through improved risk sensitivity of capital requirements, convergence of regulatory and economic capital and a menu of approaches which can be varied across institutions to reflect differing risk profiles.
It also encourages banks to improve further their internal risk management systems.
The adoption of Basel II comes at a time when the local banking sector has been rocked by failures in some institution due to the interference of major shareholders in the running of the banks.
In some instances the shareholders who were also involved in managing the banks tampered with client's savings by advancing themselves huge loans which they failed to repay resulting in the collapse of the banks.
Some of the institutions include Interfin and Royal bank.
The practice raised corporate governance issues and proposals to ensure that shareholders do not interfere in operation of the bank that they own.
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