Banking supervisors from over 120 countries reiterated the importance of continued improvements in banks’ governance and management of risk, as well as confirming their determination to improve supervisory cooperation and information-sharing.

At the International Conference of Banking Supervisors held in Mérida, Mexico, bank supervisors from central banks and supervisory agencies in 120 countries also endorsed the updated version of the Basel Core Principles for Effective Banking Supervision and its methodology. They declared their continued support for the implementation of international minimum standards for bank supervision in all countries.

The 25 principles are globally agreed minimum standards for banking regulation and supervision, covering a wide range of aspects including areas such as licensing, ownership of banks, bank capital adequacy, risk management, consolidated supervision, ways to deal with problematic situations in banks, and the division of tasks and responsibilities between home and host authorities.

The updated core principles are designed to ensure their continued validity and usefulness. The revision pays significantly more attention to sound risk management and corporate governance practices. A new “umbrella” principle covering all common aspects across different risk types has been added, and the criteria for assessing interest rate, liquidity and operational risks have been enhanced. The criteria dealing with the fight against money laundering and terrorist financing as well as fraud prevention have also been strengthened.

In addition, cross-border and cross-sectoral trends and developments are reflected more comprehensively, as is the need for closer cooperation and information exchange between supervisors of different sectors and countries. The review also stresses the importance of the independence, accountability and transparency of bank supervisory authorities.

Speaking at the conference, the chairman of the Basel Committee and president of De Nederlandsche Bank, Nout Wellink said, “The core principles have for many years been a useful tool for countries, helping them to improve their banking supervision. The now completed update ensures that the principles will remain current and relevant”.

Along with the new core principles, the conference also focused on issues arising from the growing presence of international banks in domestic markets.

Nick Le Pan, the outgoing Superintendent of Financial Institutions for Canada and vice chairman of the Basel Committee, chaired a panel on international banks in domestic markets. He said that “enhanced communication and cooperation among supervisors are hugely important not only to the success of Basel II implementation, but also to how we supervise global banks most efficiently and effectively as banks and markets rapidly evolve.”

Malcolm Knight, general manager of the Bank for International Settlements, commenting on the proceedings, added that he was “encouraged to see that banking supervisors and central banks are increasingly combining the traditional tools of supervision with a broader, macroprudential, perspective in the pursuit of financial stability.”