Basel Committee on Banking Supervision
The Basel Committee is the primary global standard-setter for the prudential regulation of banks and provides a forum for cooperation on banking supervisory matters. Its mandate is to strengthen the regulation, supervision and practices of banks worldwide with the purpose of enhancing financial stability. Mr Stefan Ingves, Governor of Sveriges Riksbank, is the chairman of the Basel Committee.
The Committee reports to the Group of Governors and Heads of Supervision (GHOS). The Committee seeks the endorsement of GHOS for its major decisions and its work programme.
The Committee's Secretariat is located at the Bank for International Settlements in Basel, Switzerland, and is staffed mainly by professional supervisors on temporary secondment from member institutions. In addition to undertaking the secretarial work for the Committee and its many expert sub-committees, it stands ready to give advice to supervisory authorities in all countries. Mr Wayne Byres is the Secretary General of the Basel Committee.
The Committee formulates supervisory standards and guidelines to promote global financial stability. However, these have no legal force. Rather, they are developed and issued by the agreement of members, and in the expectation that individual national authorities will implement them. In this way, the Committee encourages convergence towards common standards and monitors their implementation, but without attempting detailed harmonisation of member countries' supervisory approaches.
The Committee establishes minimum standards for the prudential regulation and supervision of banks. The standards are primarily directed at internationally-active banks (although they may be applied more broadly), and jurisdictions represented on the Committee are expected to implement them in full. Importantly, Committee standards constitute minimum requirements and members may decide to go beyond them.
The key standards of the Committee are its capital adequacy framework (mostly recently revised by the Basel III set of reforms in December 2010), the recently developed Liquidity Coverage Ratio, and the Core Principles for Effective Banking Supervision.
Guidelines elaborate the standards in areas where they are considered desirable for the prudential regulation and supervision of banks, in particular internationally-active banks. They generally supplement the Committee's standards by providing additional guidance for the purpose of their implementation.
The Committee has issued guidance on diverse range of issues, including corporate governance, liquidity risk management, operational risk and internal controls, foreign exchange settlement risk, internal and external audit, stress testing and supervisory colleges.
The Committee also produces sound practice papers, which describe actual observed practices, with the goal of promoting common understanding and improving supervisory or banking practices. Committee members and banks are encouraged to compare these practices with those applied in their own jurisdictions to identify potential areas for improvement.
Recent sound practice papers have covered topics such as stress testing, asset securitisation, resolution and remuneration.
With the backing of the G20, the Committee has in recent years established a more active programme to monitor members' commitments to implement Basel Committee standards. This is designed to promote greater consistency in the implementation of global standards, and improved transparency of instances where national differences exist.
The Committee is conducting this work in a number of forms: it publishes periodic reports on the progress being made to implement agreed reforms in accordance with the required timelines, it produces detailed assessments of national regulations against the agreed international standards, and it reviews the consistency in the application of those regulations to individual banks.