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Risk management and the implementation of the Basel Accord in emerging countries: An application to Pakistan

Author

Listed:
  • Masood, Omar
  • Fry, J. M.

Abstract

This paper addresses an important contemporary issue; namely the implementation of the Basel Accord worldwide. The Basel Accord provides a series of measures to improve the stability of the world’s financial system but its implementation poses a number of challenges for both developing and emerging economies. Pakistan faces a number of unique challenges in this regard due to its recent economic expansion and the fact that the rate at which the Basel Accord is being adopted lags behind that of other countries. This paper throws light on this and a number of related issues due to a combination of the novelty of the survey data from risk managers coupled with a rigorous statistical analysis. Results reflect that the Basel Accord is generally well regarded due to its underlying aims of improved capital standards and a scientific treatment of risk. However, operational risk emerges as a key barrier to implementation in Pakistan. A number of further obstacles are highlighted, which, do seem to have been addressed although only with a partial degree of success. Privately owned banks appear to be more technically competent and more favourably disposed towards implementation than publicly owned banks.

Suggested Citation

  • Masood, Omar & Fry, J. M., 2011. "Risk management and the implementation of the Basel Accord in emerging countries: An application to Pakistan," MPRA Paper 34163, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:34163
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    File URL: https://mpra.ub.uni-muenchen.de/34163/1/MPRA_paper_34163.pdf
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    References listed on IDEAS

    as
    1. Wendy Dobson & Gary Clyde Hufbauer & Hyun Koo Cho, 2001. "World Capital Markets: Challenge to the G-10," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 328, April.
    2. Seth Cumming & Hugo Nel, 2005. "Capital Controls And The Lending Behaviour Of South African Banks: Preliminary Findings On The Expected Impact Of Basel Ii," South African Journal of Economics, Economic Society of South Africa, vol. 73(4), pages 641-656, December.
    3. Rixtel, Adrian van & Alexopoulou, Ioana & Harada, Kimie & 原田, 喜美枝, 2003. "The New Basel Capital Accord and Its Impact on Japanese Banking: A Qualitative Analysis," CEI Working Paper Series 2003-25, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    4. Rime, Bertrand, 2001. "Capital requirements and bank behaviour: Empirical evidence for Switzerland," Journal of Banking & Finance, Elsevier, vol. 25(4), pages 789-805, April.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Risk Management; Basel Accord; Banking; Financial Regulation; Emerging Markets;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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