At times, the committee uses this common understanding to develop
guidelines and supervisory standards in areas where they are desirable.
In this regard the committee is best known for its international
standards on capital adequacy; the core principles for effective banking
supervision; and the Concordat on cross-border banking supervision.
The committee encourages contacts and cooperation among its members and
other banking supervisory authority. It circulates the supervisors
throughout the world both published and unpublished papers proving
guidance on banking supervisory matters. Contacts have been further
strengthen by an International Conference for Banking Supervisors (ICBS)
which takes place every two years. The Committee's Secretariat is
located at the Bank for International Settlement in Basel, Switzerland,
and is staffed mainly by professional supervisors on temporary
secondment from member institutions. In addition to undertaking the
secretariat work for the committee and its many expert sub-committees,
it stands ready to give advice to supervisory authorities in all
countries. Wayne Byres is the Secretary General of the Basel Committee.
The committee does not poses any formal supranational supervisory
authority, and its conclusions do not, and were never intended to, have
legal force. Rather, it formulates broad supervisory standards and
guidelines and recommends statements of best practice in the expectation
that individual authority will take steps to implement them through
detailed arrangements-statutory or otherwise-which are best suited there
own national systems. In this way, committee encourages convergence
towards common approaches and common standards without attempting
detailed harmonisation of member countries' supervisory techniques.
The committee reports to the central bank governors and Heads of
Supervision of its member countries. It seeks their endorsements for
their major initiatives. These decision cover very wide range of
financial issues. On important objective of the committee's work has
been to close gaps in international supervisory coverage in pursuit of
two basic principles: that no foreign banking establishment should
escape supervision; and that supervision should be adequate. To achieve
this, the committee has issued a long series of documents since 1975.
In 1988, the Committee decided to introduce a capital measurement
referred to as the Basel Capital Accord. This system provided for the
implementation of a credit risk measurement. Framework with a minimum
capital standard of 8 percent by end-1992 since 1988, this framework has
been progressively introduced not only in member countries but also in
virtually all other countries with internationally active banks. In June
1999, the committee issued a proposal for a revised Capital Adequacy
Framework.
The proposed capital framework consist of three pillars: minimum capital
requirement which seek to refine the standardised rules set forth in
the 1988 accord; supervisory review of an institutions' internal
assessment process and capital adequacy; and effective use of disclosure
to strengthen market discipline as the complement to supervisory
efforts. Following extensive interaction with banks, industry groups and
supervisory authorities that are not members of the committee, the
revised framework was issued on 26th June 2004. This text serves as the
basis for national rule-making and for banks to complete their
preparation for the new framework implementation.Over the past few years, the committee has moved more aggressively to promote sound supervisory standard worldwide. In close collaboration with many jurisdictions which are not members of the committee in 1997 it developed a set of "core principles for effective banking supervision", which provides a comprehensive blueprint for an effective supervisory system. To facilitate implementation and assessment the committee in Oct 1999 developed the "core principles methodology". The core principles and methodology were revised recently and released in Oct 2006.
In order to enable a wider group of countries to be associated with the work being pursued in Basel, the committee has always encouraged contacts and cooperation between its members and other banking supervisory authorities.
Member countries:
Argentina, Australia, Belgium, Brazil, Canada, China, France, Germany, Hong-Kong, India, Indonesia, Italy, Japan, Luxembourg, Mexico,-Netherlands, Russia, Saudi Arabia, Singapore, South Africa, South Korea, Spain, Sweden, Switzerland, Turkey, UK, US.
Basel II
The
Basel II Framework describes a more comprehensive measure and minimum
standard for capital adequacy for national supervisory authorities are
now working to implement through domestic rule-making and adoption
procedures. It seeks to improve on the existing rules by aligning
regulatory capital requirements more closely to the underlined risks the
banks face. In addition, the Basel II Framework intended to promote a
more forward-looking approach to capital supervision, one that encourage
banks to identify the risks they may face, today and in the future and
to develop or improve their ability to manage those risks. As a result,
it is intended to be more flexible and better able to evolve with
advances in markets and risk management practices.
The efforts of the Basel Committee on banking supervision to revise the
standard governing the capital adequacy of internationally active banks
achieved a critical milestone in the publication of an agreed text in
June 2004.
In Nov 2005, the committee issued an updated version of the revised
framework incorporating the additional guidance set forth in the
committee's paper. The application of Basel II trading activities and
the treatment of double default effects (July 2005).
On 4th July 2006, the committee issued a comprehensive version of the
Basel II Framework. Solely as a matter convenience to readers, this 2004
Basel II Framework, the elements of the 1988 accord that were not
revised during the Basel II process, the 1996 Amendment to the capital
accord incorporate market risks, and the 2005 paper on the application
of Basel II to trading activities and the treatment if double default
effects. No new elements have been introduced in this compilation.
Basel III
Basel III is a comprehensive set of reform measures, developed by the
Basel Committee on banking supervision, to strengthen the regulation,
supervision and risk management of the banking sector. These measures
aim to :
- improve the banking sector's ability to absorb shocks arising from financial and economic stress, whatever the source
- improve risk management and governance
- strengthen banks' transparency and disclosures.
The reforms target:
- bank level, or microprudential, regulation, which will help raise the resilience of individual banking institutions, to periods of stress.
- macropurdential, system wide risk that can build across the banking sector as well as the procyclical amplification of these risks over time.
The two approaches to supervision are complementary as greater
resilience at the individual bank level reduces the risk of system wide
shocks.
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