The Basel II "Use Test" - A Retail Credit Approach

Developing and Implementing Effective Retail Credit Risk Strategies Using Basel II

by Stephen D. Morris



Book Details

Language : English
Publication Date : 8/5/2008

Format : Softcover
Dimensions : 6x9
Page Count : 248
ISBN : 9781434373014
Format : Hardcover
Dimensions : 6x9
Page Count : 248
ISBN : 9781434373021
Format : E-Book
Dimensions : N/A
Page Count : 1
ISBN : 9781467839556

About the Book

The essence of this text is the application of The Basel II Framework Use Test.  I will illustrate the facets of Use Test adherence with risk management tools and strategies that complement a bank’s pursuit of Advanced Internal Ratings Based Approach, Basel II Framework compliance.  I will simultaneously pay close attention to the specific Basel II Framework, Use Test adherence measures.  This book offers the practitioner a useful prescription for ensuring that their bank covers the necessary bases when pursuing its Basel II Framework implementation.  It additionally puts into proper context where banks should be concerned in their pursuit of the Use Test, with specific attention to regulator, boards and executives concerns that the bank continues to operate with sound fiscal behaviour.

 The very foundation of a bank’s lending practices is the credit cycle.  This book identifies both the traditional model and the newly minted Basel II model of the credit cycle.  It also demonstrates practices that create sustainable business processes which optimize the risk-reward drivers of a retail banking environment.  It focuses on the different operational areas of the bank and the role each plays within the Basel II credit cycle.  Finally, it provides a foundation for which the credit practices present in Marketing, Underwriting, Account Management, Portfolio Management, Recoveries and Collections and Regulatory Capital setting can be justly applied.


Banks must make use of The Basel II Framework estimation tools, thus confirming that they are predictive, accurate and reliable in the estimation of regulatory capital as well as in the day-to-day running of the bank. In spite of the prescriptive nature of The Basel II Framework model estimates this book will illustrate how to exploit their elemental design into profitable pursuits.  While one fundamental challenge relating to Basel II Framework adherence is incorporating these tools into the Credit Cycle, another focuses on enhancing and improving existing credit practices found within the bank’s organizational structure in light of traditional banking shareholder drivers.  This book thus simplifies this directive.


About the Author

Stephen has worked in the field of credit risk management for over eighteen years.  Much of this time has been spent working with banks, trust companies and software companies related to the credit risk field. 


Stephen has worked on three Basel II engagements during this time and has been intimately involved with numerous facets of Basel II implementations both in retail and wholesale institutions.


Stephen is very involved with helping banks prepare themselves for evaluation before the regulatory bodies of their jurisdictions in meeting the Pillars 1-3 requirements.


This is Stephen's first publication.  He identified the need for this book while helping banks recognize the need to imbed the various Basel II metrics into their existing infrastructures.  Although the Use test is mentioned in only one paragraph its importance pervades throughout the entire Basel II Framework.


It is equally important for banks to prove that they use these regulatory capital estimation techniques in the areas of marketing, underwriting, management and disposal of credit as it is for them to be used for their minimum capital requirements.  


Stephen hopes to continue this gospel throughout the banking world in the coming years as banks gradually adopt the Basel II Framework.


Stephen resides in Toronto with his wife Cindy and three children Abigail, Leora and Zachary.