20 December 2011

Basel Committee issues consultative paper on revised "Core principles for effective banking supervision"

The consultative paper updates the Committee's 2006 Core principles for effective banking supervision and the associated Core principles methodology, and merges the two documents into one. The Core Principles have also been re-ordered, highlighting the difference between what supervisors do themselves and what they expect banks to do. Principles 1 to 13 address supervisory powers, responsibilities and functions, focusing on effective risk-based supervision, and the need for early intervention and timely supervisory actions. Principles 14 to 29 cover supervisory expectations of banks, emphasising the importance of good corporate governance and risk management, as well as compliance with supervisory standards.

The Core Principles have been enhanced to strengthen supervisory practices and risk management. In addition, the revised Core Principles respond to several key trends and developments that emerged during the last few years of market turmoil: the need for greater intensity and resources to deal effectively with systemically important banks; the importance of applying a system-wide, macro perspective to the micro-prudential supervision of banks to assist in identifying, analysing and taking pre-emptive action to address systemic risk; and the increasing focus on effective crisis management, recovery and resolution measures in reducing both the probability and impact of a bank failure.

The Core Principles are the de facto framework of minimum standards for sound supervisory practices and are universally applicable. The Committee believes that implementation of the revised Core Principles by all countries will be a significant step towards improving financial stability domestically and internationally, and provide a good basis for further development of effective supervisory systems.

The revised Core Principles represented the collective efforts between the Basel Committee and other banking supervisors from around the world, as well as the International Monetary Fund and the World Bank.

Press release

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