Foreword
This chapter sets out the foreword to the Core Principles.
- Effective as of: 25 Apr 2024
- Last update: 25 Apr 2024
- Status Current
01.1
The Core Principles for effective banking supervision (Core Principles) are the de facto minimum standard for sound prudential regulation and supervision of banks and banking systems. The Core Principles are considered universally applicable and should be applied by national authorities in the supervision of banks within their jurisdictions.
01.2
The Committee issues the Core Principles as its contribution to strengthening the global financial system. Weaknesses in the banking system of a country, whether developing or developed, can threaten financial stability both within that country and internationally. The Committee believes that implementation of the Core Principles by all countries would be a significant step towards improving financial stability domestically and internationally and that it would provide a good basis for further development of effective supervisory systems. The vast majority of countries have endorsed the Core Principles and have committed to fully implement them.
01.3
The Core Principles are used by countries as a benchmark to assess the effectiveness of their supervisory systems, to identify future work to achieve a baseline level of sound supervisory practices and to upgrade supervisory systems and practices (as appropriate) in line with the evolution of their respective banking systems. They are also used by the International Monetary Fund (IMF) and the World Bank in the context of the Financial Sector Assessment Program (FSAP) to assess the effectiveness of countries' banking supervisory systems and practices.
01.4
Each iteration of the Core Principles builds upon the preceding versions and seeks to achieve the right balance in raising the bar for sound supervision while retaining the Core Principles as a flexible, globally applicable standard. To ensure the universal applicability of the Core Principles, reviews are conducted by a group composed of both Committee and non-Committee member countries and regional groups of banking supervisors, as well as the IMF and World Bank. The Committee also consults with industry and the public before finalising revisions to the standard.
01.5
Given the importance of consistent and effective standards implementation, the Committee is ready to encourage work at the national level to implement the Core Principles in conjunction with other supervisory bodies and interested parties. The Committee invites international financial institutions and donor agencies to use the Core Principles to assist individual countries to strengthen their supervisory arrangements. The Committee also remains committed to further enhancing its interaction with supervisors from non-member countries.
This standard describes the scope of application of the Basel Framework.
This standard describes the criteria that bank capital instruments must meet to be eligible to satisfy the Basel capital requirements, as well as necessary regulatory adjustments and transitional arrangements.
This standard describes the framework for risk-based capital requirements.
This standard describes how to calculate capital requirements for credit risk.
This standard describes how to calculate capital requirements for market risk and credit valuation adjustment risk.
This standard describes how to calculate capital requirements for operational risk.
This standard describes the simple, transparent, non-risk-based leverage ratio. This measure intends to restrict the build-up of leverage in the banking sector and reinforce the risk-based requirements with a simple, non-risk-based "backstop" measure.
This standard describes the Liquidity Coverage Ratio, a measure which promotes the short-term resilience of a bank's liquidity risk profile.
The net stable funding ratio requires banks to maintain a stable funding profile in relation to the composition of their assets and off-balance-sheet activities.
Large exposures regulation limits the maximum loss that a bank could face in the event of a sudden counterparty failure to a level that does not endanger the bank's solvency. This standard requires banks to measure their exposures to a single counterparty or a group of connected counterparties and limit the size of large exposures in relation to their capital.
This standard establishes minimum standards for margin requirements for non-centrally cleared derivatives. Such requirements reduce systemic risk with respect to non-standardised derivatives by reducing contagion and spillover risks and promoting central clearing.
The Pillar 2 supervisory review process ensures that banks have adequate capital and liquidity to support all the risks in their business, especially with respect to risks not fully captured by the Pillar 1 process, and encourages good risk management.
This standard sets out disclosure requirements, which aim to encourage market discipline.
The Basel Core Principles provide a comprehensive standard for establishing a sound foundation for the regulation, supervision, governance and risk management of the banking sector.
