Mizuho adopts Basel III compliance toolkit as rules tighten
The European and US operations of Japan’s Mizuho International has adopted the common reporting, financial reporting and liquidity coverage ratio modules of Wolters Kluwer’s Basel III toolkit, which is designed to help banks cope as regulators tighten the screws on the banking sector by imposing ever higher capital requirements.
Mizuho International has adopted the package to help automate the production of Basel III regulatory reports, which require all UK firms to submit new regulatory returns this year. The Wolters Kluwer reporting system collates, validates and reconciles data from various sources and makes it available across the bank as a single auditable data set.
“Although we had worked with Wolters Kluwer for many years and used their product for our reporting capital and Bank of England reporting, the scale of regulatory change was so vast we were required to step back and assess all solutions in the market,” said Simon Norris, executive director, information systems department at Mizuho International.
Basel III primarily aims to make the banking system more robust by ensuring banks deleverage and put aside greater reserves of capital. Under the new rules, the key capital ratio is set at 4.5%, which is up from the previous standard 2%. Norris is not alone in thinking the new rules will have a significant impact on banks’ technology. According to research by IT infrastructure provider Cognizant published this week, stringent data reporting and risk management requirements will compel virtually all banks to overhaul their IT infrastructure, both for the sake of compliance and operational efficiencies.
“These changes will necessitate a fundamental review of each bank’s operating model,” said the firm. “Many banks will need to decide which businesses and geographies to focus on and which to exit.”
The scale of the regulatory agenda looks unlikely to diminish any time soon. Earlier this week, the Basel Committee on Banking Supervision set out plans to impose an even stricter exposure limit on major global banks’ exposure to each other and the introduction of more detailed reporting obligations, to take effect from 1 January 2019. Under the proposals, major global banks would be restricted from conducting business with each other beyond 10-15% of their core capital; at present, the recommended limit is 25%.
As part of the regulatory reporting solution, Mizuho International will have access to Wolters Kluwer regulatory update service, which means that the firm’s staff will work with Mizuho to ensure the bank remains compliant with changes in regulation in areas such as data management, market risk and credit calculations.