Specialisation in Mortgage Risk Under Basel II

PENENTUAN BOBOT RESIKO KREDIT UNTUK RUMAH TINGGAL: STUDI KASUS DI INDONESIA

Buletin Ekonomi Moneter dan Perbankan ◽

10.21098/bemp.v10i1.218 ◽

2007 ◽

Vol 10 (1) ◽

Author(s):

Imansyah Imansyah ◽

Mirza Yuniar Isnaeni Mara

Keyword(s):

Lower Risk ◽

Basel Ii ◽

Mortgage Default ◽

Current Regulation ◽

Loss Given Default ◽

Residential Mortgage ◽

Different Types ◽

Mortgage Risk

This paper analyzes the appropriateness of the basic risk weight for the fully secured residential mortgage, recommended in Basel II, to be implemented on Indonesian economy. As the supervisory authorities can customize the 35% of recommended risk weight based on the national arrangements, we analyze the practical ground of the residential mortgage in Indonesia focusing on the probability and the loss given default for this credit type.The result propose a lower risk weight for a fully secured residential mortgage risk weight. For a different types of residential mortgage, this paper suggest the use of Loan to Value (LTV) ratio to determine the risk weight. Rather than using a uniform 50% risk weight as required by the current regulation, our result recommend to give a different weight for a different LTV class; 75% weight for LTV greater than 90%, 50% for LTV between 80% to 90%, 45% for LTV between 70% to 80%, and 40% for a LTV less than 70%.However, the adoption of the proposed residential mortgage risk weight is subject to 2 strict prudential criterias; (i) the loan is used as the residence of the borrower; (ii) the loan is secured by the first lien or first legal charge on the residential property.Keywords: weight risk, bank, mortgage, default, Basel II, Indonesia.JEL Classification: E51, G21

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Business Intelligence als Enabler des Basel II-Berichtswesens

Controlling ◽

10.15358/0935-0381-2009-10-538 ◽

2009 ◽

Vol 21 (10) ◽

pp. 538-544 ◽

Cited By ~ 1

Author(s):

Roland Gabriel ◽

Guido Golla ◽

Tobias Hoppe ◽

Alexander Pastwa ◽

Pantcho Roussev

Keyword(s):

Business Intelligence ◽

Basel Ii

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Implementing the Basel II Accord in Lebanon. (c2005)

10.26756/th.2005.21 ◽

2005 ◽

Author(s):

Halah Afif Najd

Keyword(s):

Basel Ii

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Islamic Banking Regulations in Light of Basel II

American Journal of Islamic Social Sciences ◽

10.35632/ajiss.v27i1.357 ◽

2010 ◽

Vol 27 (1) ◽

pp. 74-101 ◽

Cited By ~ 3

Author(s):

M. Kabir Hassan ◽

Muhammad Abdul Mannan Chowdhury

Keyword(s):

Financial Institutions ◽

Banking Regulation ◽

Capital Requirements ◽

Basel Ii ◽

Capital Adequacy ◽

Regulatory Agencies ◽

Islamic Banking ◽

Islamic Banks ◽

Minimum Capital ◽

Regulatory Standards

This paper seeks to determine whether the existing regulatory standards and supervisory framework are adequate to ensure the viability, strength, and continued expansion of Islamic financial institutions. The reemergence of Islamic banking and the attention given to it by regulators around the globe as to the implications of a recently issued Basel II banking regulation makes this article timely. The Basel II framework, which is based on minimum capital requirements, a supervisory review process, and the effective use of market discipline, aligns capital adequacy with banking risks and provides an incentive for financial institutions to enhance risk management and their system of internal controls. Like conventional banks, Islamic banks operate under different regulatory regimes. The still diverse views held by the regulatory agencies of different countries on Islamic banking and finance operations make it harder to assess the overall performance of international Islamic banks. In light of the increased financial innovation and diversity of instruments offered in Islamic finance, the need to improve the transparency of bank operations is particularly relevant for Islamic banks. While product diversity is important in maintaining their competitiveness, it also requires increased transparency and disclosure to improve the understanding of markets and regulatory agencies. The governance of Islamic banks is made even more complex by the need for these banks to meet a set of ethical and financial standards defined by the Shari`ah and the nature of the financial contracts banks use to mobilize deposits. Effective transparency in this area will greatly enhance their credibility and reinforce their depositors and investors’ level of confidence.

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