basel committee on banking supervision 1 cross-border supervisory cooperation under the revised...

BASEL COMMITTEE ON BANKING SUPERVISIONBASEL COMMITTEE ON BANKING SUPERVISION

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Cross-Border Supervisory Cooperation under the Revised Basel Core Principles and Basel II

6th Annual International Seminar on Policy Challenges for the Financial Sector

World Bank/IMF/Federal Reserve Board

Washington 7 June 2006

Karl F. CordewenerDeputy Secretary General


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Outline

Core Principles - the revision process

Basel II – focus now on implementation

Supervisory cooperation – even more required

Post Basel II - the Committee’s focus


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Core Principles

Core Principles (CP) are set of standards for sound supervisory practices

Committee presented 25 minimum standards in 1997

Jurisdictions can be evaluated (also through self-assessments) against CPs to identify weaknesses

To facilitate evaluations, Methodology released in 1999

Used in more than 130 countries


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Why are the CPs being revised

Material developments in regulation and supervision since release

New supervisory guidance has been issued

Experience gathered through assessments should be reflected

Aim was not a major revision

Drafting group composed of representatives from Committee member countries and other countries

Draft currently out for consultation


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Core Principles and Basel II

Basel II not precondition for compliance with CPs

But (high degree of) compliance precondition for successful implementation of Basel II

Basel I banks should also be compliant


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Outline






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Basel II – A Global Framework

Committee involved non-member countries to a great extent

It is likely that Basel II will become the new yardstick for assessing banks’ financial soundness (as Basel I)

– Expected to be implemented by many other countries

– Timing of implementation will (and should) vary


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When should countries implement Basel II?

Basel II contains time schedule for implementation

But timing should be determined by a country’s own circumstances

Only national authorities can answer when Basel II should be implemented

Basel II may be a lesser priority compared to other efforts (e.g. Core Principles, sound corporate governance)

Basel II has significant benefits, but poses significant challenges as well


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Outline






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Supervisory cooperation

Not a new issue

– From its inception, Committee’s focus was on supervisory cooperation

– Several documents released (starting in 1975 with Concordat)

However, cooperation has become even more important under Basel II

– Different approaches

– Validation

– Systemically important subsidiaries


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Accord Implementation Group

Mandate: share information, discuss home-host issues, promote consistency in implementation of Basel II

Guidance provided through (e.g.)

– High-level principles for the cross-border implementation of Basel II

– Home-host information sharing for effective Basel II implementation

Cross-border case studies Various other documents Discussions at various events


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Home-host information sharing

Paper released in May 2006 Developed jointly with CPLG Focus on Basel II, but may be beneficial as regards other

issues Reiterates importance of communication between home

and host supervisor while stating that banks have the primary role in implementing Basel II

Addresses “significant” subsidiaries

– Significant for the home jurisdiction

– Significant for the host jurisdiction


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Outline






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Basel II is more a journey

than a destination


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What are the main themes for the future?

Concerning capital requirements, focus is on implementation

Avoiding regulatory overload

Enhanced coordination with global supervisory community

More focus on other supervisory areas

basel committee on banking supervision 1 cross-border supervisory cooperation under the revised...

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