Members of the Basel Committee on Banking Supervision (BCBS) recently met virtually to assess recent market developments and risks to the global banking system, and consider how supervision can be made more effective in the face of these challenges.
In that meeting, the members finalized an analytical progress report on lessons learned from the 2023 banking turmoil, commissioned by the Brazilian G20 Presidency. The report will be submitted to the G20 Finance Ministers and Central Bank Governors in October. The Committee also discussed progress on its work to improve supervisory effectiveness in the wake of the banking turmoil. As a part of those efforts, the BCBS is developing a suite of practical tools to support supervisors, with a focus on liquidity and interest rate risks, the sustainability of business models, and the importance of sound supervisory judgment.
In their discussion of the challenges confronting the banking system, the Committee members highlighted the risks associated with large, leveraged positions after short-lived spikes in market volatility in mid-2023. They also emphasized the need to monitor banks' connections to non-bank financial intermediaries. And, following a series of operational risk disruptions in July, the BCBS stressed the importance of robust operational resilience and third-party risk management.
In an In Focus article from our 2024 Compendium, Neil Esho, Secretary General of the BCBS, calls for supervisory agencies to ensure their culture is forward-looking, proactive, and outcomes-focused to support more effective supervision.
"Thinking about how best to achieve sound supervisory outcomes has received increasing attention from a number of supervisory agencies in recent years," Esho writes. "Good supervisory outcomes are largely influenced by risk culture, particularly factors such as willingness to act, persistence, and intelligent risk-taking. These intangible qualities are pivotal in enhancing supervisors’ ability to promote safety and soundness of banks and the banking system." ▸ Read More
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