Global banking supervisors pledge deeper cooperation

Banking supervisors from over 120 countries today pledged deeper cooperation to fortify the stability of the financial system and to encourage improvements in banks’ management of risk.

At the invitation of the Bank of Spain, more than 260 senior representatives of supervisory authorities and central banks met this week in Madrid at the Thirteenth International Conference of Banking Supervisors (ICBS). They discussed the implementation of the new international framework for bank capital requirements (“Basel II”) as well as current issues in accounting. The event was organised jointly by the Bank of Spain and the Basel Committee on Banking Supervision, a group of central banks and bank supervisory authorities in the G10 countries.

Their Majesties, the King and Queen of Spain, and other Spanish authorities welcomed the delegates to Madrid in a ceremonial opening. King Juan Carlos I noted that the stability of the banking system is a public asset that requires careful attention. He declared his hope that the work discussed at the ICBS would benefit more and more people over time and called the meeting a good example of international cooperation.

Mr Jaime Caruana, Governor of the Bank of Spain and Chairman of the Basel Committee, in a keynote address, stressed the need to reinforce the infrastructure for banking and supervision by applying the principles behind Basel II. He recognised that “adopting Basel II on the same timetable as the member countries of the Basel Committee may not be feasible for all countries.” However, he highlighted that the principles of its three pillars are applicable to all banking systems. In that regard, he said that “the preparations and hard work that we undertake today to prepare for Basel II will, at the same time, strengthen the financial and supervisory infrastructures in our countries more generally, even before we implement Basel II.”

Mr Nicholas Le Pan, the Canadian Superintendent of Financial Institutions and Vice Chairman of the Basel Committee, opened a panel discussion on practical issues related to the implementation of Basel II. In his remarks, Mr Le Pan emphasised the importance of communication between supervisors, and between supervisors and banks, in preparing for Basel II. He reported that the Committee’s Accord Implementation Group continues to encourage practical work among supervisors on applying Basel II effectively and efficiently to internationally active banking organisations. “I believe that enhanced trust and communication is not built solely by talking about it, but by doing,” he said.

Professor Dr Arnold Schilder, Executive Director of De Nederlandsche Bank and Chairman of the Accounting Task Force of the Basel Committee, chaired a second panel on recent developments in accounting that are relevant for effective banking supervision. In working groups, delegates discussed sound practices for loan accounting, accounting issues relevant to capital, as well as recent developments in fair value accounting and in the relationship between supervisors and auditors. Delegates also heard views offered by representatives of the banking sector on capital, accounting, and risk management.

The ICBS, held biennially since 1979, promotes cooperation among national authorities in the supervision of internationally active banking organisations. Its basic purpose is to foster cooperation among supervisors worldwide, who gather to discuss current issues. The Comisión Nacional Bancaria y de Valores (CNBV) of Mexico will host the next ICBS in Mexico City in 2006.