A survey released today by Accenture finds that banks are facing an uphill struggle in preparing for the new international capital adequacy regime known as Basel II.

The firm surveyed senior executives responsible for Basel II compliance at 63 of the largest banks in Canada, the U.S., and Europe, to gauge the response to the challenges posed by Basel II; which aims to make existing capital rules more risk-sensitive.

Findings indicate that most banks are finding implementation tougher than anticipated and are less certain about the benefits of compliance than last year, when Accenture conducted a similar survey. Nevertheless, the vast majority of respondents said that the regulation is a catalyst for moving toward a more risk-based culture by focusing senior management more closely on risk practices and on securing funding for necessary technology, it reports.

European banks are still much further along the Basel II implementation cycle than those in U.S., it says. The Basel II rules are expected to take effect globally in January 2008, although in the U.S. only the largest internationally active banks are required to comply.

“We were expecting more progress than we found over the last 12 months,” said Paul Cartwright, managing partner of the Finance & Performance Management practice in Accenture’s Financial Services operating group. “On the other hand, we’re seeing a greater focus on moving forward on compliance, especially in North America. That’s good, because the survey indicates that complying with Basel II is more difficult than most bankers thought.”

Major survey findings include: 45% said they expect to spend in excess of $50 million through 2007 on Basel II compliance, up significantly from 23% in last year’s survey; 79% said they expect Basel II to improve their banks’ capital positions only slightly or not at all, an increase from 73% in last year’s survey; and, 48% said that the Basel II implementation process has improved their enterprise-level economic capital framework.

The survey was designed and analyzed by Accenture and executed via telephone interviews with senior executives at 63 of the largest banks in North America and Europe during April and May.