Q: What do you see as the challenges for ABN AMRO arising from Basel II and IAS 39?
A: As yet, we have not seen the final proposals from Basel in respect of the new Capital Accord and accordingly, we can only be subjective in terms of what we think will be the results based on the current drafts that have been in circulation. Similarly the full effects of adopting IAS 39 have yet to be felt by banks, although it is much closer to full implementation than the Basel Accord. Consequently, there are uncertainties with respect to our own balance sheet in the context of these proposals but despite these uncertainties, we do have a clear view as to the likely impact on our business. For example, if you look at our wholesale credit portfolio, given the fact that a high proportion of it comprises investment grade assets, there should be a substantial release of regulatory capital. Again, our sizeable domestic mortgage business is a favourable asset class for us to hold but it is obviously not all one-sided. Our small and medium-sized corporate business loan portfolio in the Netherlands, the US, Brazil and elsewhere, will probably require an increase in regulatory capital. Moreover, there will be an additional risk factor included within the regulatory capital framework; namely operational risk and this could be a significant charge for an institution of our complexity, given our global presence and range of activities.
