According to a recently-released report by Standard & Poor’s Ratings Services, the coming implementation of Basel II policies and practices, “is not expected to have a dramatic impact on Gulf Cooperation Council (GCC) banks, [instead] it will help them to improve their risk-management systems and focus more on quantitative information/analysis.”


Although, according to Emmanuel Volland, credit analyst at S&PRS, many banks will undoubtedly still find it challenging to obtain reliable regional data on corporate defaults, on a range of other items, a cautious approach by GCC regulators should ensure a smooth transition in the short run.


Indeed, already, these bodies have stipulated that the simplest approach to capital management under Basel II, the so-called “standardised approach,” will shortly be enforced as the norm across the board.


In the short-to-medium term, S&PRS says it also expects the most sophisticated Gulf banks to move to the Internal Ratings Based approach that, according to Volland, “would require deeper and more complex work.”


Banks, he reiterates, “will be challenged to find reliable regional data on probability of default and loss given default,” a glaring issue in the region, among several other problem spots, which will have to be dealt with in the coming years as a programme of comprehensive reform and liberalisation rather than merely as a one sector only regulatory revision.