Lebanese banks have been compliant since 2008 with the regulations issued by the Basel Committee through the requirements and guidelines communicated by the Central Bank of Lebanon.
In accordance with Pillar 1 of Basel II & III, the coverage of risks using equity capital is applied by Banque Libano-Française as follows:
- the "standardized approach" for credit risk,
- the "standardized approach" for market risk,
- the "basic indicator approach" for operational risk.
In parallel, Banque Libano-Française has adopted internal risk management softwares that allow moving on to more advanced methods of calculation and therefore reducing capital charges at both credit risk level - through the activation of Moody's software for internal borrower and facility rating – as well as operational risk level - with the acquisition of Care software for risk mapping.
Additionally, Banque Libano-Française has internally adopted softwares for risk management allowing it to embrace the advanced methods of calculation, and therefore reducing capital charges at both credit risk level - through the implementation of Moody's software for internal borrower and facility rating – as well as operational risk level - with the acquisition of Care software for risk mapping.
As for the liquidity risk management, the Bank is installing the necessary process to comply with the Basel III liquidity ratios for the short-term (Liquidity Coverage Ratio) and long term (Net Stable Funding Ratio), as required by the regulator. Similarly, Asset and Liability Management modules will be activated in the short term on the new core system.
Furthermore, Banque Libano-Française conducts an internal assessment of the ability of its Capital to cover further risks not identified by the Pillar I, through the annual ICAAP exercise - Internal Capital Adequacy Assessment Process - recommended by the Pillar II of Basel II.
In addition, the Bank abides to the new regulations of Basel III concerning the quality and quantity of eligible Capital, and maintains a large buffer above the minimum solvency ratios required by the Lebanese regulators.