Basel Core Principles changed to reflect need for international co-operation

The Basel core principles for effective banking supervision have been updated to pay more attention to cross-border issues and sound risk management and corporate governance practices.

The revision also emphasises the need for closer co-operation and information-sharing between national regulators, as well as the importance of regulators’ independence, accountability and transparency.

The principles were changed as a result of a decision at the Basel Committee on Banking Supervision (BCBS) in 2004 to update the 1997 version to a globally applicable standard. The revised principles were completed by the BCBS’ Core Principles Liaison Group, and were released yesterday at the International Convention of Banking Supervisors (ICBS).

Apart from the core principles, the ICBS focused on regulatory co-operation and improvements in banks’ governance. Banking supervisors from 120 countries discussed the arising issues of international banks in domestic markets, and the impact of home-host on implementing Basel II.

Nicholas Le Pan, the vice-chairman of the BCBS, said “enhanced communication and co-operation 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.”

The Bank for International Settlements (BIS) noted that the revised principles should be used from now on, though it acknowledged that full implementation may take time.

Click here to see the revised principles on the BIS website and here to see the corresponding methodology.