Banking supervisors of the Americas and the Caribbean convene to discuss global and regional supervisory priorities

14th ASBA-BCBS-FSI high-level meeting on banking supervision, Lima, Peru, 1-2 October 2019

Discussions centred on current issues facing banking supervisors during the 14th high-level meeting on banking supervision, held on 1-2 October 2019 in Lima, Peru. The Association of Supervisors of Banks in the Americas (ASBA), the Basel Committee on Banking Supervision (BCBS) and the Bank for International Settlement's Financial Stability Institute (FSI) jointly organised the meeting, which was hosted by the Superintendency of Banking, Insurance and Private Pension Funds of Peru.

Participants discussed the issues associated with the different institutional arrangements for financial sector authorities and the resulting differences in mandates. Participants also discussed the coordination and cooperation mechanisms in place in order to safeguard financial stability, focusing in particular on coordination between microprudential and macroprudential supervision and in the area of cyber security. The discussions highlighted that the emergence of fintech seems to have contributed to the increase in issues that financial sector authorities face but which are traditionally not within their remit, underscoring the need for closer coordination and cooperation with other authorities.

" A number of financial authorities have put in place initiatives such as innovation hubs, accelerators and sandboxes to more effectively harness these opportunities and, in the process, seem to have embraced the promotion of innovation as one of their mandates. In terms of risks, the usual prudential concerns regarding financial and operational risks are still present, but in the case of the latter, they have been magnified due to increased cyber risk and third-party interconnections. In addition to these risks, there are issues relating to consumer protection, data protection and privacy, and market competition, among others. Most of these issues do not fall under the remit of financial authorities, which underscores the need for closer coordination with other authorities such as those for data protection and competition.

Agustín Carstens, General Manager of the BIS

The discussions then turned to the actual conduct of supervision. In particular, participants shared practices on how the proportionality principle is applied in adapting supervisory tools to different types of bank, in particular for the purposes of implementing Pillar 2 of the Basel framework. Pablo Hernández de Cos, Chairman of the Basel Committee on Banking Supervision, discussed the role of proportionality in the Basel framework. He noted that, while the Basel framework is expected to be implemented in full by all Basel Committee member jurisdictions for internationally active banks, the Basel Core Principles for Effective Banking Supervision - which are relevant for all banks and jurisdictions worldwide - set the role of proportionality firmly in place. The Basel Committee also recognises that non-Basel Committee member jurisdictions may wish to implement some or all of the Basel III framework. The Basel III framework includes a number of standardised approaches that are, in principle, meant to be simpler to operate and implement; there is no expectation that banks must use internally modelled approaches.

Pablo Hernández de Cos, Governor, Bank of Spain

Participants then exchanged practical insights gleaned from actual experiences on effective approaches to resolving banking crises. There is recognition of the need to identify necessary enhancements to domestic crisis management procedures and cross-border arrangements before an actual crisis hits.

The meeting wrapped up with a discussion of priorities of regulators and supervisors in the region, including the main risks that concern them and the issues at the top of their agenda. This includes credit risk, cyber risk, issues related to anti-money laundering and combating the financing of terrorism, effective implementation of international standards, adapting regulatory approaches and supervisory processes to technological innovation, and the implications of climate change for the financial system.