Basel Committee on Banking Supervision

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The Basel Committee on Banking Supervision
Founded 1974
Headquarters Basel, Switzerland

The Basel Committee on Banking Supervision provides a forum for regular cooperation on banking supervisory matters. Its objective is to enhance understanding of key supervisory issues and improve the quality of banking supervision worldwide. The Basel Committee usually meets four times per year. It has four main working groups which also meet regularly.

The Committee's members come from Belgium, Canada, France, Germany, Italy, Japan, Luxembourg, the Netherlands, Spain, Sweden, Switzerland, the United Kingdom and the United States. The current Chairman of the Committee is Stefan Ingves, Governor of Sveriges Riksbank, the central bank of Sweden.[1]

The Basel Committee was established by the central bank Governors of the Group of Ten countries at the end of 1974. In the early 1990s, the Basel Committee decided to update a 1988 capital measurement system commonly referred to as the Basel Accord, and it formed (Basel II) to include bank capital requirements for market risk. This change had implications for non-bank securities firms. [2] The Basel accord was again updated in 2010 (Basel III) to include higher bank capital requirements. Banks must now have a minimum common equity requirement of 4.5%, up from the earlier 2% requirement, for a total of 7% core capital by 2019. [3]

The committee is best known for its international standards on capital adequacy; the Core Principles for Effective Banking Supervision; and the Concordat on cross-border banking supervision.

The Committee has no formal supervisory authority over its member countries. Its conclusions do not have legal force; rather, it develops broad standards for banking supervision and recommends best practices. The committee leaves it to the individual authorities to implement these standards and guidelines. It encourages common approaches and standards among countries.

The Committee reports to the central bank Governors of the Group of Ten countries and to the heads of supervisory authorities of these countries where the central bank does not have formal responsibility. It seeks their endorsement for its major initiatives.

The Committee's fifteen-person Secretariat is provided by the Bank for International Settlements in Basel, Switzerland. The Secretariat is mainly staffed by professional supervisors on temporary secondment from member institutions.[4]


History

The Basel Committee was established by the central-bank Governors of the Group of Ten countries at the end of 1974.

The committee's decisions cover a wide range of financial issues. One important objective of the Committee's work has been to close gaps in international supervisory coverage in pursuit of two basic principles: that no foreign banking establishment should escape supervision; and that supervision should be adequate. To achieve this, the Committee has issued a long series of documents since 1975.

In 1988, the Committee introduced a capital measurement system referred to as the Basel Capital Accord. The Accord implemented a credit risk measurement framework with a minimum capital standard of 8 percent by end-1992. The framework has been progressively introduced since 1988 in member countries as well as almost all other countries with international banks.

In June 1999, the Committee proposed a revised Capital Adequacy Framework consisting of three pillars: minimum capital requirements; supervisory review of an institution's internal assessment process and capital adequacy; and effective use of disclosure to strengthen market discipline. The revised framework was issued on 26 June 2004, and serves as a basis for national rule-making.[5]

Membership

Member countries are: Belgium, Canada, France, Germany, Italy, Japan, Luxembourg, the Netherlands, Spain, Sweden, Switzerland, the United Kingdom and the United States.

Key People

References

  1. Basel Committee on Banking Supervision. BIS.
  2. Basel II: Revised international capital framework. BIS.
  3. Bank restructuring likely under Basil 3. BusinessWorld Online.
  4. History of the Basel Committee and its Membership. Bank for International Settlements.
  5. History of the Basel Committee and its Membership. Bank for International Settlements.