Joint BCBS-BCG statement on proportionality

The Basel Committee on Banking Supervision expects the Basel Framework - encompassing the Basel III standards - to be implemented in full by Committee member jurisdictions for internationally active banks.

The Core principles for effective banking supervision embed the role of proportionality, including that "supervisory practices should be commensurate with the risk profile and systemic importance of the banks being supervised". These principles are relevant for all banks and jurisdictions around the world and provide the basis for a resilient banking system.

The Basel Committee and the Basel Consultative Group (BCG) support the use of proportionality in implementing the Basel Framework in a manner consistent with the Core Principles. The Basel Framework envisions a range of approaches, from simpler standardised approaches to advanced approaches.

The Committee recently conducted a stocktake of proportionality measures in place across jurisdictions, which highlighted that a majority of Committee and BCG jurisdictions currently apply such measures. Moreover, proportionality can take different forms, including, but not limited to, the following:

• implementing the most appropriate approaches among those available in the Basel Framework (ie among the range of standardised and internally-modelled approaches) for internationally-active banks in member jurisdictions. There is no expectation - even for internationally-active banks - that they must use internally-modelled approaches; and
• implementing standards for banks in non-BCBS member jurisdictions that are broadly consistent with the principles of the applicable Basel standards.

A proportionate regulatory framework should not reduce the resilience of banks or dilute the prudential regulatory framework, but rather reflect the relative differences in risk and complexity across banks and the markets in which they operate. Indeed, as the Basel Framework comprises minimum standards, jurisdictions are free to apply more conservative requirements. Many Committee and BCG jurisdictions have pursued such an approach. A proportionate framework should also consider supervisory capacity and resources, particularly when implementing more complex standards.

Note to editors:

The Basel Committee on Banking Supervision (BCBS) is the primary global standard setter for the prudential regulation of banks and provides a forum for regular cooperation on banking supervisory matters. Its 45 members comprise central banks and bank supervisors from 28 jurisdictions. Additional information on the BCBS is available here.

The Basel Consultative Group (BCG) provides a forum for deepening the Committee's engagement with supervisors around the world on banking supervisory issues. It facilitates broad supervisory dialogue with non-member countries on new Committee initiatives early in the process by gathering senior representatives from various countries, international institutions and regional groups of banking supervisors that are not members of the Committee. BCG membership comprises central banks and supervisory authorities from 28 countries, as well as supervisory groups, international agencies and other bodies. Additional information on the BCG is available here.