The Basel Committee on Banking Supervision – the supervisory arm of the BIS, the central bank for central banks – has issued a public consultation on proposed revisions to its core principles for effective banking supervision.
Perhaps the most substantial change proposed by Basel is the broadening of its guidelines on operational risk management, or number 25 of its core principles. The Basel Committee is proposing a widening of principle 25 to include digital resilience alongside operational risk and adds a proposed new requirement that banks should assess: “Tolerance for disruption to their critical operations” to the existing listed operational risks.
The core principles, which were originally published in 1997 and last substantively updated in 2012, represent minimum standards for the regulation and supervision of banks and banking systems. They are used by central banks and other supervisory authorities to assess the effectiveness of their regulatory frameworks, as well as by organisations such as the International Monetary Fund and the World Bank to evaluate the effectiveness of national banking regulations.
The Basel Committee said: “The proposed amendments have been informed by several thematic topics reflecting regulatory and supervisory developments in: (i) financial risks; (ii) operational resilience; (iii) systemic risk and macroprudential aspects of supervision; (iv) new risks, including climate-related financial risks and the digitalisation of finance; (v) non-bank financial intermediation; and (vi) risk management practices.”
The proposals were developed by a Task Force comprised of both Committee and non-Committee member jurisdictions, as well as the IMF and World Bank.
Full details available here.
[Image Source: Bank for International Settlements]
