Standardisation of Banks-Jayakar Bathula, NALSAR University of Law-HYDERABAD
SCHEME OF THE PRESENTATION
I- BUERO OF INDIAN STANDARDS
i , HISTORY
ii, BIS: BANKING
II-INTERNATIONAL STANDARD ORGANISATION
i , HISTORY
ii, ISO: BANKING
IV- ISLAMIC BANKING STANDARDS
V- INTERNATIONAL BANKING STANDARDS
i , EU
I-BUERO OF INDIAN STANDARDS
i, HISTORY:The organization was formerly the Indian Standards
Institution (ISI), set up under the Resolution of the
Department of Industries and Supplies ,on 3 September
1946. The ISI was registered under the Societies Registration
The Buero if Indian standards is the National
Standard Body of India, working under the aegis of Ministry
of Consumer affairs, Food & Public Distribution,
Government of India. It is Established by the Buero of
Indian Standards Act-1986, came in to force on 23
* As a corporate body, it has 25 members from Central or State Governments,
industry, scientific and research institutions, and consumer organizations.
Its headquarters are in New Delhi, with regional offices in Kolkata,
Chennai, Mumbai, Chandigarh and 20 branch offices. It also works as
WTO-TBT enquiry point for India
*BIS:- As a founder member of International Organization for
Standardization (ISO) continues to take part in international standardization
*BIS- Participates in its policy making bodies like Committee on
Developing Country Matters (DEVCO), Committee on Conformity
Assessment (CASCO), Committee on Information (INFCO) and
Committee on Consumer Policy(COPOLCO).
*BIS is also actively involved in the International Electro Technical
Commission (IEC-WTO) and has participation status in 34 Technical
*BIS is also having memorandum of understanding in the field of
standardization, certification and quality assurance on metrology with the
*BIS holds secretarial responsibilities for 5 Technical Committees and 5
Subcommittees and maintains participation status in 51 Technical
Committees with other countries.
*BIS has taken a leading role in ISO and its activities from the time of its very
creation. It has also taken keen interest and Primary member in its policy
making committees like Committee on Conformity Assessment (CASCO),
Committee on Consumer Policy (COPOLCO), Development Committee
(DEVCO), Committee on Information (INFCO) and Committee on
Reference Materials (REMCO).
(ISO/TC 50, ISO/TC 56, ISO/TC 113, ISO/TC 120 and ISO/TC 149) and 5
subcommittees (ISO/TC 120/SC 1 & SC 2, ISO/TC 34/SC 7, ISO/TC
113/SC 1 and SC 6).
A , Quality management System Certification Scheme ISO 9001.
B, Environmental Management System Certification Scheme ISO 14001.
C, Occupational Health and Safety Management System Certification Scheme
D, Service Quality Management System Certification Scheme IS 15700.
* India started adopting Basel accord Capital Standards in Banking sector
from 1992. Basel-III :-Standards set for Indian banks by RBI are credit positive
as they focus on strengthening Tier-I capital. RBI released final Basel III
capitalization standards for Indian banks that are more conservative than those
outlined by the Bank for International Settlements (BIS).
*Indian Oversea Bank (IOB) has sought capital support of Rs 2,100 crore
from the government for enhancing its capital base and Standardization.
INTERNATIONAL STANDARD ORGANISATION
* ISO is the world’s largest developer of voluntary Organization.
International Standards give state of the art specifications for products,
services and good practice, helping to make industry more efficient and
effective. Developed through global consensus, it helps to break down
barriers to international trade.
* ISO develops International Standards. It was founded in 1947, and since
then have published more than 19 500 International Standards covering
almost all aspects of technology and business. From food safety to
computers, and agriculture to healthcare, ISO International Standards
impact all our lives.
• A standard is a document that provides requirements, specifications,
guidelines or characteristics that can be used consistently to ensure that
materials, products, processes and services are fit for their purpose.
• ISO- ensure that products and services are safe, reliable and of good
quality. For business, they are strategic tools that reduce costs by
minimizing waste and errors, and increasing productivity. They help
Banking companies to access new markets, the level playing field for
developing countries and facilitate free and fair global trade.
It has a membership of 161 National Standards Bodies (NSBs) from varies
countries large and small, industrialized, developing and in transition, in all
regions of the world.
ISO ACCES COUNTRIES:• Full members ;-(Or member bodies) influence ISO standards development
and strategy by participating and voting in ISO technical and policy
meetings. Full members sell and adopt ISO International Standards
nationally, internationally, (Countries-144).
• Correspondent members:-observe the development of ISO standards and
strategy by attending ISO technical and policy meetings as observers.
Correspondent members can sell and adopt ISO International Standards
nationally, ( Countries-45).
. Subscriber members:- keep up to date on ISO’s work but cannot participate
in any policy makings. They do not sell or adopt International Standards
nationally, (Countries-4, Antigua, Barbuda, Honduras and Leo people’s
IV-ISO:INTERNATIONAL BANKIG SECTOR
• ISO 20022 was developed and is maintained by ISO/TC 68, the ISO
technical committee responsible for standardization in the field of banking,
securities and other financial services. This foresight and flexibility is built
into the ISO 20022 standards.
• One of the standard’s advantages is its data dictionary based approach,
which enables reuse and standardization of data across all messages. About
half of the 15 million messages that are exchanged on the SWIFT network
every day are -ISO 15022.
• ISO 8583 is used for almost all credit and debit card transactions, including
ATMs. Several hundred million ISO 8583 messages are exchanged daily
between issuing and acquiring banks.
• ISO 1004-1:2013 specifies the shape, dimensions, Magnetic ink character
recognition, magnetic signal level, and tolerances for the E-13B characters
which include 10 numerals and four special symbols printed in magnetic
ink and used for the purpose of character recognition. It describes the
various known types of printing defects and other printing considerations,
together with the tolerances permitted.
• ISO 4217:2008 is intended for use in any application of trade, commerce
and banking, where currencies and, where appropriate, funds are required
to be described. It is designed to be equally suitable for manual users and
for those employing automated systems.
• ISO 6166 defines the structure of an International Securities Identifying
Number (ISIN) in Banking Sector.
• New regulatory requirements such as Basel II also contribute to IT
complexity, because by necessity they require banks to find short-term
reporting solutions that couldn’t have been anticipated when the important
systems were implemented. Basel II and Basel III is the regulatory regime
to require major overhaul of banking infrastructures: in the past decade,
banks have also addressed Y2K, Sarbanes-Oxley, and IFRS in all of its
ISO/TC 34/SC7………….Spices and Condiments
ISO/TC 50 ……………….Lac
ISO/TC 56 ………………Mica
ISO/TC 113………………Measurement of Liquid Flow an Open Channel
ISO/TC 113/SC 1………...Velocity Area Methods
ISO/TC 113/SC 6………...Sediment Transport
V-GATS AND WTO:*
GATS-Part IV: Progressive Liberalization, Article XIX: Negotiation
of Specific Commitments:- is an important element in the international
framework that affects the regulation of every WTO Member country’s
financial service sector. However, except for a limited number of countriesno attempt has been made to compare WTO commitments to open the
domestic banking sector to foreign banks with actual regulatory practice in
a systematic and comprehensive manner on a cross-country basis.
Services represents the fastest growing sector of the global economy
and account for two thirds of global output, one third of
global employment and nearly 20% of global trade.
The developing measures of the degree of openness to foreign
banking, based upon both commitments made and actual regulatory
practice, with a view to assessing the overall extent to which countries
open their borders to foreign banks more than they are legally obliged
to do based upon their WTO commitments. The dataset is also used to
assess the overall extent to which countries discriminate against foreign
banks by regulating them less favorably than domestic banks.
The General Agreement on Trade in Services (GATS) is the first and
only set of multilateral rules governing international trade in services.
Negotiated in the Uruguay Round, it was developed in response to the huge
growth of the services economy over the past 30 years and the greater
potential for trading services brought about by the communications
When the idea of bringing rules on services into the multilateral
trading system was floated in the early to mid 1980s, a number of countries
were skeptical and even opposed. They believed such an agreement could
undermine governments’ ability to pursue national policy objectives and
constrain their regulatory powers. The agreement that was developed,
however, allows a high degree of flexibility, both within the framework of
rules and also in terms of the market access commitments.
ACCOUNTING AND AUDITING ORGANIZATION OF ISLAMIC
Standardization is necessary, and it is bound to happen. This is
because the world is a global village. Costumers’ consciousness and
competition among Islamic banks will lead to standardization of
Islamic financial Sector.
Financial Accounting Standard as operating Ijarah, shall be
measured using one of the two methods,
Recognition of lease income from investment in real estate; and
Disclosures about Ijara and Ijara Muntahia Bittamleek assets.
STANDARD NORMS:* For the purpose of this standard, an investment in real estate shall be
recognized as an asset.
A), It is probable that the future economic benefits that are associated
with the investment in real estate will flow to the entity.
B),The cost of the investment in real estate can be measured reliably.
STATUS QUO:Different Islamic banks offer different products.
Some are deemed unlawful by other Islamic banks.
The Shariah procedures of the same product differ in Islamic banks.
Reason: Conflict of Fatawa (legal opinions of Shariah scholars).
* The bankers from East and West gathered in Manama at the 18th Annual
World Islamic Banking Conference in November 2011, one topic was
prevalent at nearly all discussion rounds: standardization.
• But while Islamic Finance is expanding to new frontiers such as Uganda,
France, Egypt, South Korea and Oman, the objective to make Shariahcompliant financial products more standardized appears more and more
like a far-fetched daydream.
• It’s legal environment based on the Napoleonic Civil Code. The French
jurisdiction differs greatly from British Common law or Case law, the
predominant legal framework in England, the centre of Islamic finance in
• London-residing bank calls for more standardization overlook the
individual nature of national jurisdictions, which still exist even in the 27member states European Union.
SHARIAH SCHOLARS IN CHARGE OF STANDARDIZATION:Challenges:* Possible fanaticism about some Fiqh schools & opinions.
* Agreeing on the standards on which products to be standardized.
* Possible reliance on loose or controversial standards.
Solutions:• Independence of the Shariah scholars involved.
• Careful selection of the scholars involved.
• Selection of Scholars of different Fiqh schools.
• Endorsement of the standards by Fiqh academies and leagues.
. Legal challenges resulting from possible conflicts with local laws.
. Different Fiqh opinions may serve or be in conflict with different laws of
certain countries in Domestic levels.
• When opting for a particular Shariah rule for sake of standardization, the
most dominant International laws should be taken into consideration.
* Shariah:• Day-to-day transaction must not contravene the standards.
BENEFITS OF STANDARDIZATION:-
• Sound public image.
• Elimination of Shariah risk.
• Cost Reduction.
• Less legal problems.
• More possible cooperation between Islamic banks.
• Clear way towards universality of Islamic Banking.
* (Not only even Islamic Banks- For every banks).
TYPES OF INTERNATIONAL STANDARD BANKING OFFICES:-
* Correspondent Bank.
* Representative Offices.
* Foreign Branches.
* Subsidiary and Affiliate Banks.
* Edge Act Banks.
* Offshore Banking centers.
* International Banking Facilities.
THE WORLD’S 10 STANDARD BANKS:-
Mizuho Bank/ Mizuho Corp Bank
Bank of America
JP Morgan Chase
Royal Bank of Scotland Group
Sumitomo Mitsui Banking Group
UFJ Bank Ltd.
EUROPEAN BANKING RATIO:-
• Most Eurocurrency transactions are interbank transactions in the amount of
$1,000,000 and up, Depends on……
• Common reference rates include.
The London Interbank Offered Rate.
The Paris Interbank Offered Rate.
The Singapore Interbank Offered Rate.
• A new reference rate for the new euro currency,
EURIBOR the rate at which interbank time deposits of € are offered by
one prime bank to another.
EUROCREDITS:• Euro credits are short- to medium-term loans of Eurocurrency.
• The loans are denominated in currencies other than the home currency of
the Euro bank.
• Often the loans are too large for one bank to underwrite; a number of banks
form a syndicate to share the risk of the loan.
• Euro credits feature an adjustable rate. On Euro credits originating in
London the base rate is LIBOR.
• Euro notes are short-term notes underwritten by a group of international
investment banks or international commercial banks.
• They are sold at a discount from face value and pay back the full face value
at maturity Level.
• Maturity is typically three to six months.
• U.S Parent Banks like foreign subsidiaries because they allow U.S Banks to
• Edge Act Banks are federally Chartered subsidiaries of U.S that are
physically located in the U.S, and allowed to engage in a full range of
International Banking Activities.
• The Edge Act was a 1919 Amendment to Sec 25 of the 1914 Federal
• The purpose was to allow U.S Banks to compete International with the
Expenses of setting up operations.
• As part of the Debt Rescheduling agreements among the Bank lending
Syndicates and the Debtor nation creditor banks would sell their loans for
U.S Dollars at discount from face value to MNCs desiring value.
Standardization of the International Banking Activities of U.S. Banks
* There was pressure on Congress for more extensive regulation of foreign
banks, so as to be fair to domestic banks, and to ensure the effectiveness of
domestic monetary policy.
Bank Standardization Acts in U.S:-
* Bank Holding Company Act Amendments-1970.
* International Banking Act-1978.
* Depository Institutions Deregulation and Monetary Control Act-1980.
* Foreign Bank Supervision Enhancement Act-1991.
• Bank capital adequacy refers to the amount of equity capital and other
securities a bank holds as reserves.
• There are various standards and international agreements regarding how
much bank capital is “enough” to ensure the safety and soundness of the
• This crisis followed a period of economic expansion in the region financed
by record private capital inflows.
• Bankers from the G-10 countries actively sought to finance the growth
opportunities in Asia by providing businesses with a full range of products
• This led to domestic price bubbles in East Asia, particularly in real estate
OFFSHORE STANDARD BANKING CENTERS:-
• The IMF recognized,
– the Bahamas
– the Cayman Islands
– Hong Kong
– the Netherlands Antilles
• As major offshore banking centers.
Thank a lot
By Jayakar Bathula