Banking regulators and central bankers HAVE endorsed a revised set of supervisory principles, designed to enhance bank oversight in the wake of the financial crisis.
The Basel Committee on Banking Supervision’s revised core principles for effective banking supervision, which represent the global standard for the prudential regulation of banks, were endorsed by bank supervisors and central bankers representing more than 100 countries at a meeting this week in Istanbul.
The revised principles draw on lessons learned during the financial crisis, and the Basel Committee says that they represent “a significant step forward” from the 2006 version of the principles, reflecting changes in regulatory thinking since then, including: applying supervisory attention on a proportionate basis, in line with the risk profile and systemic importance of banks; considering both the macro- and micro-prudential elements of supervision; adopting effective crisis management strategies, and measures to mitigate the impact of bank failures; and, fostering market discipline through supervision of corporate governance, disclosure and transparency.
Sabine Lautenschlager, deputy president of the Deutsche Bundesbank and co-chair of the group that developed the revised principles, noted that they, “deliver simplicity and flexibility by being outcome-oriented and focusing on supervisors’ primary objective of promoting the safety and soundness of banks and the banking system.”
“While the latest revision breaks new ground in several areas to address post-crisis lessons and other significant developments, it also goes back to the roots of banking supervision in its emphasis on a more forward-looking perspective through early intervention and on applying a more effective risk-based approach to supervision,” added Teo Swee Lian, deputy managing director of the Monetary Authority of Singapore and co-chair of the group.
“Supervisors and banks have made considerable strides in strengthening banks’ risk management and supervisory practices since the onset of the crisis. Continued efforts by all countries to implement and comply with the core principles and robust assessment by the IMF and World Bank will result in further advances,” said Stefan Ingves, chairman of the Basel Committee and governor of Sweden’s central bank.