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SecureWave Sanctuary & Basel II

Basel II: The Basics

• What: offers a new set of standards for establishing minimum capital requirements for banking organizations to reduce operational risks
• Who: Consequently, this text frequently refers to rules for "banks", banking groups, and other firms subject to prudential banking regulations
• Why: The overarching goal for the Basel II Framework is to promote the adequate capitalization of banks and to encourage improvements in risk management, thereby strengthening the stability of the financial system
• How: Implement and maintain appropriate administrative, physical, and technical safeguards to protect against threats or hazards, reducing risks and capital required to support those risks

Basel II & Sanctuary®Supported Basel II Parts

Basel II - Part 2 (First Pillar)

V. Operational Risk

“Operational risk is defined as the risk of loss resulting from inadequate or failed internal process, people and systems or from external events.”

“The operational risk management function is responsible for developing strategies to identify, assess, monitor and control/ mitigate operational risk”

“Any internal operational risk measurement system must be consistent with the scope of operational risk defined by the Committee in paragraph 644 and the loss event types defined in Annex 7”

VI. Trading book issues

“Banks must establish and maintain adequate systems and controls sufficient to give management and supervisors the confidence that their valuation estimates are prudent and reliable.”

Basel II - Part 3 (Second Pillar)

II. Four key principles for supervisory review

Monitoring and reporting
“The bank should establish an adequate system for monitoring and reporting risk exposures”

“The bank’s internal control structure is essential to the capital assessment process. The bank’s board of directors has a responsibility to ensure that management establishes a system for assessing the various risks, develops a system to relate risk to the bank’s capital level, and establishes a method for monitoring compliance with internal policies.”

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