The Basel Committee on Banking Supervision (BCBS
) was founded in Basel at the end of 1974 and is located at the Bank for International Settlements (BIS). The Committee is made up of representatives of the central banks and banking supervisory authorities of 27 countries. Switzerland is represented on the Committee by FINMA and the Swiss National Bank (the SNB
). The Basel Committee is the world's most important standard-setting body for banking regulation and acts as a forum for collaboration to discuss banking supervision. Its main objective is to enhance banking supervision, thereby promoting financial stability.
Global regulatory framework
Drawing on the lessons of the recent financial crisis, the Basel Committee published a reform package in 2010 called Basel III to bolster capital and liquidity requirements. Its objective is to enhance the stability of the financial system by means of three pillars.
The three pillars of Basel III
Pillar 1 defines eligible capital and methods for calculating capital adequacy requirements for credit, market and operational risks. Stricter requirements now apply to eligible capital with respect to loss absorption capacity. Equity capital requirements have also been tightened. Other 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 which ensures that banks have sufficient capital to back all risks and also requires appropriate management of these risks. Pillar 3 defines minimum disclosure obligations for banks. Furthermore, new binding standards have also been defined for liquidity management and capital requirements for systemically important financial institutions.
Implementation in Switzerland
In Switzerland, the Basel III standards have been implemented by adapting the Capital Adequacy Ordinance and the relevant FINMA circulars. The new provisions entered into force in 2013 and should be fully implemented by the end of 2018.