In a keynote speech delivered at the Institute of International Finance Annual Membership Meeting late last month, Erik Thedéen, Chair of the Basel Committee on Banking Supervision, emphasized the need for robust prudential regulation and supervision to strengthen banking stability.
Reflecting on past crises, he stated, “Misconduct, governance failures and imprudent risk management practices further increase the likelihood and impact of crises.” He insisted that effective resilience begins with banks’ internal practices, as “the boards and management of banks should be the first port of call in managing and overseeing risks; they cannot outsource these functions to supervisors.”
Thedéen outlined the need for global collaboration, particularly in finalizing Basel III standards, and focused on the role of non-bank financial institutions (NBFIs), operational resilience, and geopolitical risk. He urged supervisors to center on system-wide oversight and suggested the industry might benefit from an institution dedicated to governance challenges, allowing supervisors to prioritize broader regulatory goals.
He likened effective regulation to “safety protocols and solid equipment,” stressing that governance should prevent complacency and ensure resilience through uncertainties. Highlighting that global standards are a “public good,” Thedéen cautioned against national deviations that could weaken international financial stability. Committed to a forward-looking approach, he acknowledged the Basel Framework must adapt to emerging risks, including the digitalization of finance and NBFIs, to sustain a robust, global banking system.
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