In April 2022, the Basel Committee on Banking Supervision (the Basel Committee) embarked on a review of “the core principles for effective banking supervision” (Core Principles or CP). This procedure is in accordance with its mandate to strengthen global capital and liquidity rules with the intention to decrease the risk of bank-level financial distress that could adversely impact the global financial system.
The review of these principles is crucial in light of the dynamic changes in the banking sector, the recent advent of digital assets, and the rise of technology-driven financial solutions. The overarching goal of the Basel Committee’s work is to facilitate the adoption of a comprehensive set of guidelines that can serve banks across the globe under different operational conditions. Special emphasis has been given to the applicability of these principles in varying capacities, from supervising small, non-complex banks to managing large international banking groups.
Last month, the Basel Committee published a Consultative Document on the Core Principles following its review. This document reflects an inclusive approach, enlisting views and feedback from multiple stakeholders including regulatory bodies, banking institutions themselves and general public. The purpose of this document is to gather insights and perspectives on the applicability of the principles under review, in tandem with the committee’s assessment.
Upon completion of this review, there will be adjustments to the Core Principles which will subsequently influence the strategies, regulations, and guidelines established by the Basel Committee. This will undoubtedly be an event of significant interest for legal professionals, especially those in the banking industry.
What remains critical is that these revisions to the Core Principles ensure that financial institutions are effectively supervised, can endure periods of financial stress, and contribute positively to global financial stability.