Twelfth Asia-Pacific High-level Meeting on Banking Supervision Bali, Indonesia, 22-23 March 2017
29 March 2017
The Financial Stability Institute (FSI), together with the Basel Committee on Banking Supervision (BCBS) and the Executives' Meeting of East Asia-Pacific Central Banks Working Group on Banking Supervision (EMEAP WGBS) held its 12th Asia-Pacific High-level Meeting. The meeting was hosted by Bank Indonesia (BI) and attended by representatives from various Asian central banks, supervisory authorities and financial institutions in the region as well as senior officials from around the world.
Meeting participants explored the broader challenges of micro- and macroprudential supervision in the current macroeconomic, financial and regulatory environment, including the effectiveness of prudential measures taken to date in Asia.
In his keynote address, Eric Rosengren, President of the Federal Reserve Bank of Boston, outlined the risks to financial stability from fluctuating commercial real estate values. He noted that "when large losses have occurred because of declines in real estate values, banks have historically shrunk their lending", and "such a tightening of lending has several compounding effects".
The second keynote, delivered by BIS Deputy General Manager Luiz Awazu Pereira da Silva, highlighted a number of potential risks to financial stability in Asia, including rising US interest rates, increasing levels of corporate and household indebtedness in Asia, and the re-emergence of trade protectionism in certain jurisdictions.
BI Deputy Governor Erwin Rijanto discussed Indonesia's progress in implementing Basel III, while BCBS Secretary General William Coen provided an update on finalising the post-crisis regulatory reforms. Participants exchanged views on the difficult balancing act between risk sensitivity, simplicity and comparability in the prudential framework, while emphasising the need to assess the cumulative impact of the post-crisis reforms.
Participants also discussed future challenges beyond the Basel III reforms and exchanged views on enhancing cyber-resilience programmes; preparing for the supervisory and risk management challenges associated with the migration to expected loss provisioning under IFRS 9; and developing novel approaches to the oversight of financial technology firms that provide banking services, given their beneficial role in promoting financial inclusion.
Professor Panicos Demetriades from the University of Leicester, and former Governor of the Central Bank of Cyprus, delivered the final keynote on the lessons from Cyprus on bank recovery and resolution. He emphasised the importance of educating bondholders and uninsured depositors who may be subject to bail-in mechanisms and communicating resolution actions to the general public to prevent contagion.
This set the context for a discussion among participants on the importance of crisis prevention measures, particularly the evolving approaches to assessing bank governance and culture and the challenges that board members face in overseeing senior management. Participants agreed that additional work was needed to better understand and assess culture and behaviour at banks, given their critical role in shaping a firm's prospective risk profile.
In his concluding remarks, FSI Chairman Fernando Restoy stressed that with the post-crisis regulatory reforms nearing completion, the international regulatory community should now shift emphasis from regulation to effective implementation through a robust system of forward-looking, risk-based supervision. He also observed that while a number of challenges remain in both the micro- and macroprudential domains, the discussions revealed that some supervisory authorities are well placed to meet these challenges. Against this background, he emphasised a continued need to facilitate the exchange of experiences and approaches among supervisors, to ensure that sound practices are disseminated throughout the global supervisory community.
The event was co-chaired by Nestor A Espenilla Jr, Chairman of the EMEAP WGBS and Deputy Governor of Bangko Sentral ng Pilipinas, and Fernando Restoy. In addition to 17 financial institutions and firms from the Asia-Pacific region and the Institute of International Finance, central banks and supervisory authorities from the following countries attended the meeting: Australia, China (including Hong Kong SAR and Macao), Indonesia, Japan, Korea, Malaysia, Nepal, the Netherlands, New Zealand, Pakistan, the Philippines, Singapore, Spain, Thailand and the United States.
Note to editors
The FSI was jointly created in 1998 by the BIS and the BCBS to assist supervisors around the world in improving and strengthening their financial systems.
Located in Basel, Switzerland, the FSI offers an extensive annual programme of activities and events in Switzerland and around the world, with different audiences and areas of focus depending on the nature of the event.
For further information on the FSI, visit www.bis.org/fsi.