Global community of banking supervisors enhances the Basel Core Principles and strengthens supervisory collaboration

Banking supervisors from over 120 countries today reiterated the importance of continued improvements in banks' governance and management of risk, as well as confirming their determination to improve supervisory cooperation and information-sharing.

The fourteenth International Conference of Banking Supervisors (ICBS), organised jointly by the Mexican National Banking and Securities Commission (CNBV) and the Basel Committee on Banking Supervision, was held this week in Mérida, Mexico. After being welcomed by Mr Jonathan Davis Arzac, President of the CNBV, more than 300 senior representatives from 150 supervisory authorities and central banks heard addresses from Mexican Finance Minister Francisco Gil Díaz and Guillermo Ortíz Martínez, Governor of the Bank of Mexico.

The ICBS programme focused on two main themes:

• The newly revised Core Principles for Effective Banking Supervision, (the subject of a separate press statement) together with related governance and supervisory processes; and
• Issues arising from the growing presence of international banks in domestic markets. This second theme included, but was not limited to, issues arising from the implementation of the Basel II capital framework.

Mr Jonathan Davis, President of the CNBV, emphasised that "conferences such as the one we have had the honour to host are of the utmost importance in addressing supervisory issues affecting banking system stability by bringing together regulators from all regions of the world."

Mr Nout Wellink, President of the Netherlands Bank and Chairman of the Basel Committee, in his opening address noted the recent death of Andrei Kozlov, first deputy chairman of the Central Bank of Russia, adding that "we will remember Mr Kozlov as a dear colleague and friend, and for his tireless efforts to promote the safety, soundness and integrity of the banking system. His death is a great loss to the international supervisory community."

Mr Wellink discussed the changing landscape of global banking. He noted that "it will be necessary for supervisors in the future to design flexible standards and regulations that ensure a safe and sound banking system while still allowing for continued innovation in bank practices." He also welcomed the updated Core Principles and highlighted progress in Basel II implementation, adding that "we must remember that Basel II is more than a one-off exercise in getting the details and the numbers right. More than anything, it is a flexible framework that supports innovation over time, and provides appropriate incentives for improvements to risk management, supervision and disclosure."

Susan Schmidt Bies, member of the Board of Governors of the Federal Reserve System chaired a panel discussion focusing on issues related to Core Principles and governance. She emphasised that "the Core Principles support what supervisors are striving to achieve, often against intimidating forces. They provide a clear statement of the tools we need to do our jobs, namely adequate powers, resources and independence, tempered by appropriate accountability and transparency".

Mr Nicholas Le Pan, the outgoing Canadian Superintendent of Financial Institutions and Vice Chairman of the Basel Committee, chaired a second panel on international banks in domestic markets. He said that "enhanced communication and cooperation among supervisors are hugely important not only to the success of Basel II implementation, but also to how we supervise global banks most efficiently and effectively as banks and markets rapidly evolve."

Malcolm Knight, General Manager of the Bank for International Settlements, commenting on the proceedings, added that he was "encouraged to see that banking supervisors and central banks are increasingly combining the traditional tools of supervision with a broader, macroprudential, perspective in the pursuit of financial stability."

Other keynote addresses were delivered by Agustín Carstens Carstens, Deputy Managing Director of the International Monetary Fund, and Marcos Martínez Gavica, President of the Banks Association of Mexico. At the close of the proceedings the William Taylor Memorial lecture was delivered by José Angel Gurría, Secretary General of the Organisation for Economic Co-operation and Development.

The ICBS, which has been held biennially since 1979, promotes cooperation and discussion of current issues among banking supervisors from around the world. The National Bank of Belgium and the Belgian Banking, Finance and Insurance Commission will host the next ICBS in Brussels in 2008.