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Today the Basel Committee on Banking Supervision (BCBS) published an updated version of its Core Principles for Effective Banking Supervision, which were first published in 1997 and last updated in 2012. The Core Principles, as they are commonly known, are one of the most important sets of global supervisory standards, establishing comprehensive requirements for both supervisors and banks. They cover a wide range of supervisory powers, responsibilities and functions as well as a broad spectrum of prudential requirements and risks. The Core Principles are a playbook that governments, regulators and supervisors across the world follow when adopting and assessing their own supervisory rules and regulations. For example, many requirements in the single European rulebook can be traced back to the Core Principles. They also serve as the benchmark for the International Monetary Fund and the World Bank when assessing the effectiveness of banking supervision as part of their Financial Sector Assessment Programmes (FSAPs). FSAPs are a powerful tool for encouraging jurisdictions to improve their supervisory rules and practices in line with the global practices defined in the Core Principles. In fact, the upcoming 2024-25 FSAP of the euro area will be conducted on the basis of the revised Core Principles, which now explicitly acknowledge the existence of supranational supervisory frameworks such as the Single Supervisory Mechanism. Put simply, the Core Principles are the bedrock of effective global banking supervision. And effective, intrusive supervision is more important than ever, as the banking turmoil of March 2023 showed.[1]
The revisions to the Core Principles published today are the outcome of rich and reasoned discussions among BCBS members and supervisors from jurisdictions across the world, with input from a wide-reaching public consultation. The revisions reflect the lessons learnt over the past decade and take stock of the structural changes that are reshaping the banking system. Three new topics have been explicitly included in the Core Principles: (i) operational resilience, (ii) business model sustainability, and (iii) climate-related financial risks. Their inclusion is proof that there is a global consensus on the relevance of these risks, and broad agreement on the need for action. As these issues are also relevant for European banks, we identified them as supervisory priorities for 2023-25 and have already made great strides in incorporating them into our supervisory rules and practices....
more at SSM