Basel core principles for effective banking supervision: an update after a decade of experience

Abstract

The Basel Committee on Banking Supervision’s Core Principles for Effective Banking Supervision (BCPs) are a universally applicable minimum standard for sound prudential regulation and supervision of banks and banking systems. Supervisors use these principles to assess the quality of their regulatory and supervisory frameworks, while the International Monetary Fund (IMF) and the World Bank use them, as part of their Financial Sector Assessment Programme, to assess the efficacy of the banking supervision framework and supervisory approach in each jurisdiction. Since they were first introduced in 1997, the BCPs have undergone two revisions (in 2006 and 2012). In April 2024 the Basel Committee on Banking Supervision published a modification of the standard to account for developments over the last decade, the impact of structural trends in the sector and the lessons learned from previous implementations of the core principles. This article takes a look at the key aspects of this update, the main changes of which refer to new risks, such as climate-related financial risks and the digitalisation of finance, operational resilience, non-banking financial intermediation, financial risk, risk management practices, and systemic risk and macroprudential oversight.