The survey, which covers 154 institutions in thirteen countries across the world and around 50% of the UK market by assets, shows that in several countries across Europe, 100% of respondents had started both their credit and operational risk projects in preparation for Basel II. In the UK, by contrast, only 63% of respondent banks had started projects to address credit risk issues and 50% on operational risk, ranking the UK sixth out of seven countries in Europe for credit risk, and fifth out of seven for operational risk.

The UK was the only country to rate the cost of compliance as the biggest obstacle to implementation of the new Accord.

The survey also showed a wide disparity within the UK banking industry. Whilst some major institutions are already at the implementation stage on both credit and operational risk projects, several UK banks were still establishing a project team to look at Basel issues or were in the very early stages of project planning.

There was a similarly uneven picture in Germany, where several banks were still establishing a project team while six banks said they had already reached the testing stage on credit risk.

Further differences were found in the approaches that banks have elected to take on implementation of the Basel proposals.

For credit risk, the key findings were:
* across Europe over a quarter of respondents are completely undecided as to which approach to take;
* in the UK over 90% have already decided which approach they are most likely to aim to adopt;
* with three approaches to choose, about half the UK respondents when weighted by assets aim to adopt the most advanced approach by the Basel implementation date;
* by number of respondents, there was a fairly even spread across the approaches;
* in Europe, the distribution is slightly less even, with a stronger preference for the intermediate approach, which was more pronounced still in Germany.

On operational risk, the UK respondents are again more decisive at this stage: 83% at least having made a preliminary decision, compared with 61% in Europe and only 39% in Germany. In the UK, again weighted by assets, around a third of respondents aim to adopt the most advanced of the three approaches by implementation, with almost all the rest aiming for the intermediate approach.

Most banks rated either credit risk or operational risk as their biggest concern amongst the Basel proposals. In the UK operational risk was the highest concern. Amongst the biggest perceived obstacles to implementation of the proposals, UK respondents cited data issues only after cost, whilst internationally, data was seen as the greatest obstacle.

Commenting on the survey results, Brendan Nelson, KPMG's global banking chairman, says: "This research shows a real diversity of preparedness for Basel. Implementation has been put back a year to 2005, but that does not mean that banks can do nothing for the next year. Implementation by 2004 was agreed to be unrealistic, but implementation by 2005 will still be extremely tight. Banks that haven't started yet, or are at the very early stages, need to get moving very quickly. Whilst a few are towards the front, most UK banks certainly appear to be towards the back of the queue at the moment."