Initiatives in response to the crisis by the Basel Committee

30 March 2009

Nout Wellink, Chairman of the Basel Committee on Banking Supervision and President of the Netherlands Bank, today highlighted concrete steps the Basel Committee is taking to strengthen the global regulation of the banking sector.

Mr Wellink, speaking before the European Parliament's Committee on Economic and Monetary Affairs, noted that "supervisors must have a comprehensive strategy to deal with the crisis and the associated impact on banks. This is essential if we are to restore stability to our financial systems and economies."

The Basel Committee's current and planned initiatives are intended to produce a more robust supervisory and regulatory framework for the banking sector. These efforts, which also are in support of the initiatives and recommendations of the Financial Stability Forum and the G20 leaders, include:

  • better coverage of banks' risk exposures, including for trading book, securitisation, and derivative activities;
  • more and higher quality capital to back these exposures;
  • countercyclical capital buffers and provisions that can be built up in good times and drawn down in stress;
  • the introduction of a non-risk based measure to supplement Basel II and help contain leverage in the banking system;
  • higher liquidity buffers;
  • stronger risk management and governance standards;
  • more regulatory focus on system-wide or "macroprudential" supervision; and
  • greater transparency about the risk in banks' portfolios.

In discussing the Basel Committee's long-term strategy, Mr Wellink stated that "we need to establish a clear target for the future regulatory system that substantially reduces both the probability and severity of a crisis like the one we currently are working through." He added that "by providing clarity about the future regulatory framework, we will help re-establish near term confidence, reduce the risk of competitive distortions and limit the degrees of uncertainty for the public and private sector."