The Basel Committee on Banking Supervision (
BCBS) was founded at the end of 1974 by the central bank governors of the Group of Ten (G10). It is located in Basel at the Bank for International Settlements (BIS). The committee is made up of representatives of the central banks and banking supervisory authorities of the following 27 countries: Argentina, Australia, Belgium, Brazil, Canada, China, France, Germany, Hong Kong SAR, India, Indonesia, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, Russia, Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. Switzerland is represented on the committee by FINMA and the Swiss National Bank. The main tasks of the Basel Committee include - in addition to the general objective of strengthening the security and reliability of the international financial system - promulgating minimum international standards and guidelines for banking supervision and disseminating and fostering best practice and common methodologies in banking and supervisory activities. The Basel Committee also seeks to facilitate and promote international collaboration between supervisory authorities in the control supervision of cross-border activities and multinational banking and financial services groups. In addition, the Committee also acts as an informal forum for the exchange of information on the development of national supervisory regulation and practices as well as on current events in the financial sector.
Global regulatory framework
In December 2010, the Basel Committee on Banking Supervision published a reform package called Basel III to complement its existing international regulatory standards. This reform aims at adjusting capital adequacy and liquidity requirements, thereby strengthening the resilience of the banking sector. In the event of problems arising in the financial sector, the reform package should reduce the danger of a negative impact on the real economy, regardless of the shock trigger.
Further developing the first Capital Accord issued in 1988 and the Basel II Standards published in 2006, the current reform incorporates the lessons learnt from the recent financial crises. Its objective of enhancing the stability of the financial system is to be achieved, as under Basel II, by means of three pillars. Pillar 1 defines both eligible capital and approaches for determining capital adequacy requirements for credit, market and operational risks in terms of minimum requirements and a capital conservation buffer. Stricter requirements are now made on eligible capital with respect to loss absorption capacity and equity capital requirements have been tightened. Other new innovations are the introduction of anticyclical capital buffers and an unweighted leverage ratio to generate complementary amounts of capital. Pillar 2 covers the supervisory review process designed to ensure that banks have sufficient capital to back all risks and demands appropriate management of these risks. Pillar 3 defines minimum disclosure obligations for the banks with regard to their risk profile and the capital underpinning their risks. Besides these three pillars, new binding standards on liquidity, relevant risk management and supervision have been set out. Finally, a broader increase in capital requirements is foreseen for systemically important financial institutions.
Once the Swiss Federal Council has amended the Capital Adequacy Ordinance and the associated FINMA circulars have been adjusted, the Basel III Standards are to be implemented in Switzerland. The new rules should enter into force on 1 January 2013 and, taking the transition periods of the international regime into account, be fully implemented by the end of 2018.
Core Principles for effective banking supervision
In close collaboration with regulators in countries outside the G10, the Basel Committee on Banking Supervision published a set of core principles for effective banking supervision. This magna carta of banking supervision contains 25 generally formulated, globally applicable recommendations for the essential elements of a viable workable supervisory system. The Core Principles, which were first published in 1977, are based on experience gained in the emerging countries in the course of the nineties with inadequately regulated banking systems also being instrumental in causing serious financial crises. These principles were revised in 2006. Besides helping individual countries in their own self-assessment, they are primarily of use to international financial institutions such as the International Monetary Fund and the World Bank as a benchmark for assessment and technical support when implementing measures in the countries in question. Instructions for performing the examination process and detailed criteria for assessing compliance with the Core Principles are contained in the Core Principles Methodology published in 1999 and revised in 2006.