Core principles for effective banking supervision - Executive Summary

FSI Executive Summaries  | 
20 June 2024

The Core Principles for effective banking supervision, also known as the Basel Core Principles (BCPs), are the minimum global standards for the sound prudential regulation and supervision of banks and banking systems. Initially published by the Basel Committee on Banking Supervision (BCBS) in 1997, the BCPs have been updated three times. There are 29 principles applicable to all banks in all jurisdictions. Prudential authorities use the BCPs as a benchmark to assess the quality of their regulatory and supervisory frameworks and to help identify future work to achieve a baseline level of sound supervisory practices. They are also used by the International Monetary Fund and the World Bank to evaluate the effectiveness of countries' banking supervision systems as part of the Financial Sector Assessment Program (FSAP).

The most recent update, in 2024, reflects regulatory and supervisory developments (eg the post-Great Financial Crisis reforms introduced by the BCBS), structural changes in banking (eg the digitalisation of finance) and lessons learnt from prior FSAP assessments.         

The concept of proportionality underpins all principles. Proportionality allows supervisors to tailor applicable rules and practices to the systemic importance and risk profiles of banks and the broader characteristics of their respective financial systems.1 As such, proportionality facilitates the universal applicability of the BCPs to a wide range of banks and banking systems.

This Executive Summary outlines the preconditions for effective supervision and the 29 principles.

Preconditions for effective banking supervision

The BCPs identify six preconditions that can have a bearing on the conduct of supervision. While these preconditions are generally outside the control of supervisory authorities, supervisors should work with the government and relevant authorities to address any identified concerns.  

Powers, responsibilities and functions of supervisors (BCPs 1–13)

BCPs 1–13 focus on what supervisors themselves do, covering their powers, responsibilities and functions. BCPs 1–7 set out the relevant legal powers, institutional arrangements and requirements for bank activities, licensing and ownership. BCPs 8–13 address various tools and techniques to facilitate robust on- and off-site supervision of banks and banking groups.

Powers, responsibilities and institutional arrangements

Supervisory tools and techniques

Prudential regulations and requirements for banks (BCPs 14–29)

BCPs 14–29 cover supervisory requirements and expectations for banks, which can be grouped into three subcategories.

Corporate governance, risk management and internal controls

Capital, liquidity and other material risk requirements

Financial reporting and disclosure

This Executive Summary and related tutorials are also available in FSI Connect, the online learning tool of the Bank for International Settlements.

1  The objective of proportionality is not to dilute prudential standards but to reflect jurisdictions' circumstances and supervisory capacity.