Core Principles for Effective Banking Supervision
Following is the press statement of the Basle Committee on Banking Supervision of the Bank for International Settlements marking the release of the "Core Principles for Effective Banking Supervision." The press statement, released on September 22, 2009, outlines the work of the committee and lists 25 principles of effective supervision. The full 46-page text of the Core Principles is available on the Bank for International Settlements Internet site at http://www.bis.org/publ
The Basle Committee on Banking Supervision, with the endorsement of the central bank Governors of the Group of Ten countries, is today releasing the Basle Core Principles for Effective Banking Supervision. This document, which is a revised version of a consultative paper released in April 1997, establishes a set of twenty-five basic Principles which the Basle Committee believes must be in place for a supervisory system to be effective.
The Basle Core Principles have been drawn up by the Basle Committee in close collaboration with the supervisory authorities in fifteen emerging market countries and have benefited from broad consultation with many other supervisory authorities throughout the world.
The Principles represent the basic elements of an effective supervisory system. They are comprehensive in their coverage, addressing the preconditions for effective banking supervision, licensing and structure, prudential regulations and requirements, methods of ongoing banking supervision, information requirements, formal powers of supervisors and cross-border banking.
The Basle Core Principles are intended to serve as a basic reference for supervisory and other public authorities worldwide to apply in the supervision of all the banks within their jurisdictions. Supervisory authorities throughout the world will be invited to endorse the Core Principles, not later than October 1998. Endorsement will include an undertaking to review current supervisory arrangements against the Principles. The speed with which changes can be introduced will vary, depending on whether the supervisory authorities already possess the necessary statutory powers. Where legislative changes are required, national legislators are requested to give urgent consideration to the changes necessary to ensure that the Principles can be applied in all material respects.
1.The Basle Committee on Banking Supervision is a Committee of banking supervisory authorities which was established by the central bank Governors of the Group of Ten countries in 1975. It consists of senior representatives of bank supervisory authorities and central banks from Belgium, Canada, France, Germany, Italy, Japan, Luxembourg, Netherlands, Sweden, Switzerland, United Kingdom and the United States. It usually meets at the Bank for International Settlements in Basle where its permanent Secretariat is located.
2.The Basle Committee has been working to improve banking supervision at the international level for many years, both directly and through its many contacts with banking supervisors in every part of the world. In the last year and a half, it has been examining how best to expand its efforts aimed at strengthening prudential supervision in all countries by building on its relationships with countries outside the G-10 as well as on its earlier work to enhance prudential supervision in its member countries. In April 1997 the Committee released two documents:
- a draft comprehensive set of Core Principles for effective banking supervision (The Basle Core Principles); and,
- a Compendium (to be updated periodically) of the existing Basle Committee recommendations, guidelines and standards most of which are cross-referenced in the Core Principles document.
Both documents, with the endorsement of the G-10 central bank Governors, were submitted to the G-7 and G-10 Finance Ministers in preparation for the Denver Summit in the hope that they would provide a useful mechanism for strengthening financial stability in all countries. They were welcomed by Ministers at the Summit and the Committee was encouraged to continue its work.
3. The document now being issued is a revised version of the April 1997 document. There are still twenty-five Principles and only a few contain changes of substance. Other changes to the document are mostly textual in nature.
4. In developing the Principles, the Basle Committee has worked closely with non-G-10 supervisory authorities. The document has been prepared in a group containing representatives from the Basle Committee and from Chile, China, the Czech Republic, Hong Kong, Mexico, Russia and Thailand. Nine other countries (Argentina, Brazil, Hungary, India, Indonesia, Korea, Malaysia, Poland and Singapore) were also closely associated with the work. The drafting of the Principles benefited moreover from broad consultation with a larger group of individual supervisors, both directly and through the regional supervisory groups, as well as with the International Monetary Fund and World Bank.
5. The document calls on national agencies to apply the Principles in the supervision of all banking organizations within their jurisdictions. The Principles are minimum requirements and in many cases may need to be supplemented by other measures designed to address particular conditions and risks in the financial systems of individual countries.
6. The Basle Core Principles are intended to serve as a basic reference for supervisory and other public authorities in all countries and internationally. It will be for national supervisory authorities, many of which are actively seeking to strengthen their current supervisory regime, to use the attached document to review their existing supervisory arrangements and to initiate a programme designed to address any deficiencies as quickly as is practical within their legal authority.
7. The Principles have been designed to be verifiable by supervisors, regional supervisory groups, and the market at large. The Basle Committee will play a role, together with other interested organizations, in monitoring progress made by individual countries in implementing the Principles. It is suggested that the IMF, the World Bank and other interested organizations use the Principles in assisting individual countries to strengthen their supervisory arrangements in connection with their work aimed at promoting overall macroeconomic and financial stability.
8. Supervisory authorities throughout the world are encouraged to endorse the Basle Core Principles. The members of the Basle Committee and the sixteen other banking supervisory agencies that have participated in their drafting all agree with the content of the document.
9. The Basle Committee believes that achieving consistency with the Core Principles by every country will be a significant step in the process of improving financial stability domestically and internationally. The speed with which this objective will be achieved will vary. In many countries, substantive changes in the legislative framework and in the powers of supervisors will be necessary because many supervisory authorities do not at present have the statutory authority to implement all of the Principles. In such cases, the Basle Committee believes it is essential that national legislators give urgent consideration to the changes necessary to ensure that the Principles can be applied in all material respects. The need for new legislation will be taken into account by the Basle Committee in monitoring progress towards implementation.
10. The Basle Committee will continue to pursue its standard-setting activities in key risk areas and in key elements of banking supervision as it has done in documents such as those reproduced in the Compendium. The BasleCore Principles will serve as a reference point for future work to be done by the Committee and, where appropriate, in cooperation with non-G-10 supervisors and their regional groups. The Committee stands ready toencourage work at the national level to implement the Principles in conjunction with other supervisory bodies and interested parties. Finally, the Committee is committed to strengthening its interaction with supervisors from non-G-10 countries and intensifying its considerable investment in technical assistance and training.
11. The twenty-five Core Principles are set out below.