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&#39Half of European banks have no budget for Basel II&#39

Half of all European banks, building societies and lenders have no budget set aside to meet the capital requirements of Basel II which are set to be compulsory from 2007.

This warning comes from credit risk management consultantcy Scorex following its survey of 55 heads of retail credit with some of Europe&#39s biggest lenders, including 11 in the UK, which predicts that medium or smaller banks will struggle to meet the deadline.

Scorex says it will cost a medium-sized UK lender between £5m and £20m to have its internal rating-based approach in place to allow its risk to be assessed by the Basel II capital accord.

But the longer that lenders delay on planning and implementing the initiative, the higher the cost and the more pressure on resources, including technology and staff.

The company says that 71 per cent of those questioned say they plan to have an internal rating-based approach in place, but most have not dedicated the necessary funds.

Scorex head of sales Keith Hale says: “It seems that a large proportion of organisations have not yet considered how they are going to meet compliance by 2007 and the longer that organisations leave putting such strategies in place, the more expensive it is likely to become.”

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