Basel II / Basel III and Sarbanes-Oxley
The following business regulations are either specific to an industry (Basel II / Basel III: Banks) or to a region (Sarbanes-Oxley: USA) and, unlike the financial accounting standards, these regulations outline a set of "pillars" or "titles" for how a business should operate in its respective nature. For a more complete and detailed description of each regulation, it is recommended to visit the respective issuer's website.
| Basel II / Basel III | Sarbanes-Oxley (SOX) | |
|---|---|---|
| Issuer | Basel Committee on Banking Supervision | US Government |
| Region | International | USA |
| Organizations Affected | Banks | Public companies (including non-US companies listed on US exchanges); CPA firms auditing public companies; brokers, dealers, investment banks and financial analysts who work for public companies |
| Effective | Basel II: January 1, 2001 Basel III: Planned December 31, 2012 |
June 1, 1999 |
| Overview | The Basel Accords are recommendations on banking laws and regulations. Basel II is the second of the Basel Accords. The purpose of Basel II is to create an international standard that banking regulators can use when creating regulations about how much capital banks need to put aside to guard against financial and operational risks. The 3 pillars of Basel II are: Pillar 1: Minimum Capital Requirements – addresses credit, operational and market risk Pillar 2: Supervisory Review – gives regulators improved tools Pillar 3: Market Discipline – requires more disclosures Basel III is the third of the Basel Accords, first published in 2009, with expected implementation in December 2012. The objective of the reform package is to improve the banking sector's ability to absorb shocks arising from financial and economic stress. Basel III proposes many new capital, leverage and liquidity standards to strengthen the regulation, supervision and risk management of the banking sector. |
Sarbanes-Oxley establishes new or enhanced standards for corporate accountability and penalties for corporate wrongdoing. The legislation contains 11 titles, ranging from additional responsibilities for audit committees to tougher criminal penalties for white-collar crimes such as securities fraud. With respect to valuing derivatives, organizations have two options in order to comply with SOX regulations: 1. Implement the appropriate tools/systems and expertise 2. Engage an independent third party |
| How FINCAD can help | FINCAD solutions provide risk management and scenario analysis functionality (Pillar 1). FINCAD can help decrease reputation risk (Pillar 2), as its solutions use industry standard analytics and the company is an established, reputable company with over 18 years’ experience. Applicable FINCAD solutions: |
FINCAD provides the tools/systems for a company to value its derivative positions, plus all FINCAD solutions contain math and function documentation, instilling confidence in a company that reports these numbers on its balance sheet. Applicable FINCAD solutions: |
| Request a free trial of one of the above solutions. | ||
We hope that such information will assist you, but it should not be used or relied upon as a substitute for your own independent research. For a more comprehensive view of the standards/requirements, please visit the respective issuer's website.