Basel Committee issues consultative document on the compliance function in banks

The Basel Committee on Banking Supervision today issued a consultative document entitled The compliance function in banks. It provides basic guidance for banks and sets out banking supervisors' views on compliance in banking organisations. Comments are due by 31 January 2004.

The document explains that compliance with laws, rules and standards helps to maintain a bank's reputation with, and thus meet the expectations of its customers, the markets and society as a whole. Compliance risk management has become more formalised within the past few years and has emerged as a distinct risk management discipline.
The purpose of the compliance function is to assist a bank in managing its compliance risk - the risk of legal or regulatory sanctions, financial loss, or loss to reputation a bank may suffer as a result of its failure to comply with all applicable laws, rules and standards.
Mr Jaime Caruana, Chairman of the Basel Committee and Bank of Spain Governor remarked "That banks comply with laws and regulations is a key expectation from banking supervisors. Banking supervisors must be satisfied that effective compliance policies and procedures are followed and that management takes appropriate corrective action when breaches are identified."

Prof Arnold Schilder, member of the Basel Committee, Chairman of its Accounting Task Force and Executive Director at the Netherlands Bank, noted the importance of a proactive compliance function. He said "Boards of directors and senior management should promote an organisational culture which ensures compliance by all employees when conducting the business of the bank."
The consultative document is now available on the BIS website at www.bis.org. Comments should be submitted to the Secretariat of the Basel Committee on Banking Supervision at the Bank for International Settlements, CH-4002 Basel, Switzerland. Comments are also invited by e-mail: baselcommittee@bis.org or by fax: +41 61 280 9100.

Notes for editors

Basel Committee on Banking Supervision

The Basel Committee on Banking Supervision was established by the central bank Governors of the Group of Ten countries in 1975. It consists of senior representatives from banking supervisory authorities and the central banks of Belgium, Canada, France, Germany, Italy, Japan, Luxembourg, the Netherlands, Spain, Sweden, Switzerland, the United Kingdom and the United States. Currently, the Committee reports to the central bank Governors and heads of supervision of the G10 countries. Mr Caruana succeeded William J McDonough as Chairman of the Basel Committee on Banking Supervision as of 1 May 2003. Nicholas Le Pan, Superintendent of Financial Institutions Canada, serves in the newly established position of Vice Chairman of the Committee. The Committee usually meets at the Bank for International Settlements (BIS) in Basel, where its permanent Secretariat is located.

The Accounting Task Force

The Accounting Task Force comprises experts from Basel Committee member institutions and outside observers. It has the lead responsibility in the Committee's consideration of accounting and auditing issues.