Postbank receives Basel II approval
Deutsche Postbank AG today became one of the first banks in Germany to receive a notice of approval from the German Federal Financial Supervisory Authority (BaFin) for its implementation approach for the Basel II regulations. This means that it is permitted to use its own rating and scoring models for risk assessment and regulatory capital backing for the majority of its transactions from January 1, 2007 onward.
This represents a milestone in the development of Postbank's lending business. The use of internal risk evaluation models will lead to a significant improvement in capital utilization at Postbank, which will benefit from an advantageous risk profile in its retail business.
The notice of approval is the result of an intensive audit process in which specialist audit teams from BaFin and Deutsche Bundesbank examined Postbank's internal credit risk rating and scoring models. In the coming years, the Postbank Group will submit additional rating and scoring models for assessment with the aim of leveraging the positive effects relating to regulatory capital requirements. In particular, Postbank is planning to make its subsidiary BHW Basel II-compliant from 2008.
In accordance with Basel II, the degree of capital backing for loans is based on the concrete default risk. Accordingly, banks with a strong risk structure in their lending portfolio are required to maintain less capital to cover their loans. However, this is subject to regulatory approval of the methods used to evaluate default risk.