Featured Product

    IMF Paper on Implementing Prudential Standards in Developing Economies

    June 14, 2019

    IMF published a working paper that provides practical guidance on how developing economies, including non-Basel Committee member countries, could incorporate international standards into their prudential framework. The paper discusses the priorities when moving from Basel I to Basel III and presents five guiding principles for the adaptation of international standards (such as Basel III) to the banking systems in non-member countries of the Basel Committee.

    The paper builds on the extensive experience gained on technical assistance missions on banking supervision and regulation that the IMF provides every year to more than 70 countries as well as from the Financial Sector Assessment Program (FSAP), which has undertaken some 280 detailed assessments of banking supervision in over 160 jurisdictions since its inception in 1999. Considering the dominance of banks in the financial system of most developing economies, the paper focuses on banking regulatory and supervisory issues. The paper discusses how the Basel Core Principles for Effective Banking Supervision (BCPs) can be used to set appropriate priorities for improving banking sector oversight. The BCPs provide high-level principles that have proved to be useful when adapting and implementing international standards in many developing economies from the IMF membership. The paper also discusses the enhanced capital and liquidity prudential requirements, which have been developed post the global financial crisis. Finally, it discusses the priorities when moving from Basel I to Basel III.

    The paper highlights that new international standards, post the global financial crisis, provide a good basis for strengthening the financial systems in developing economies. However, no one-size-fits-all strategy exists to implement the post-crisis banking regulatory standards in developing economies. A thoughtful implementation of the post-crisis regulatory standards, which takes into account the specific characteristics of each jurisdiction, enhances banking system resilience in developing economies without conflicting with market development needs. Differences in financial development, the risk profile of the banking sector, and supervisory capacity need to be considered when establishing the priorities and the best path forward. Adjustments to international standards may be necessary but should observe the following guiding principles presented in the paper—

    • Rigor: Although international standards may need to be adapted to better suit developing economies, changes should not lead to less rigorous prudential frameworks that lead to less resilient financial institutions or promote riskier behavior.
    • Context: Furthermore, the regulatory framework must take into account the features of the risk environment that could be more pronounced, such as market illiquidity, high volatility, and challenges to the enforcement of claims and the execution of collateral.
    • Scope: While the characteristics of their financial systems may favor simpler standards, authorities should not compromise on the scope of regulation and must take in to account the fundamental regulatory weaknesses identified during the financial crisis.
    • Evolution: In adapting the standards and phasing in their implementation, it must be kept in mind that as financial systems deepen and become more complex, the regulatory framework will also need to support convergence to international practices.
    • Effectiveness: While the full set of international standards may not always be applicable to less complex and smaller financial markets, the underlying preconditions and expectations of the BCPs should be met.

     

    Related Link: Working Paper

     

    Keywords: International, Banking, Developing Economies, Basel III, Basel Core Principles, Regulatory Reform, IMF

    Featured Experts
    Related Articles
    News

    EC Issues Regulation on Adjustments to K-Factor Coefficients Under IFR

    The European Commission (EC) published a report summarizing responses to the targeted consultation on the supervisory convergence and the single rulebook in the European Union (EU).

    January 20, 2022 WebPage Regulatory News
    News

    OSFI Issues Results of Pilot on Climate Risk Scenario Analysis

    The Office of the Superintendent of Financial Institutions (OSFI) published an update on the discussion paper that intended to engage federally regulated financial institutions and other interested stakeholders in a dialog with OSFI, to proactively enhance and align assurance expectations over key regulatory returns.

    January 20, 2022 WebPage Regulatory News
    News

    ECB Issues Opinions on Green Bonds Standard and CRR Proposals

    The European Central Bank (ECB) published its opinion on a proposal for a regulation on European green bonds, following a request from the European Parliament.

    January 19, 2022 WebPage Regulatory News
    News

    ESRB Explores Policy Response to Risks Arising from Digitalization

    The Advisory Scientific Committee (ASC) of the European Systemic Risk Board (ESRB) published a report that explores the expected impact of digitalization on provision of financial and banking services, and proposes policy measures to address the risks stemming from digitalization.

    January 18, 2022 WebPage Regulatory News
    News

    EU Authorities Address COVID-19 Reporting, MCD, and PSD2 Issues

    The European Banking Authority (EBA) announced that the guidelines on the reporting and disclosure of exposures subject to measures COVID-relief measures shall continue to apply until further notice.

    January 17, 2022 WebPage Regulatory News
    News

    FI Publishes Multiple Regulatory and Reporting Updates

    The Swedish Financial Supervisory Authority (FI) announced that the capital adequacy reporting as at December 31, 2021 must be done by February 11, 2022.

    January 17, 2022 WebPage Regulatory News
    News

    BSP Tackles Aspects of Lending and Islamic, Open & Sustainable Finance

    The Central Bank of the Philippines (BSP) issued communications covering developments related to online lending platforms, open finance framework and roadmap, and on the expected regulations in the area sustainable finance.

    January 16, 2022 WebPage Regulatory News
    News

    US Agencies Issue Regulatory Updates, FDIC Launches Tech Sprint

    The Board of Governors of the Federal Reserve System (FED) published the final rule that amends Regulation I to reduce the quarterly reporting burden for member banks by automating the application process for adjusting their subscriptions to the Federal Reserve Bank capital stock, except in the context of mergers.

    January 13, 2022 WebPage Regulatory News
    News

    EBA Issues Guide on Bank Resolvability, Consults on Transferability

    The European Banking Authority (EBA) published its assessment of risks through the quarterly Risk Dashboard and the results of the Autumn edition of the Risk Assessment Questionnaire (RAQ).

    January 13, 2022 WebPage Regulatory News
    News

    MFSA Publishes CRD5 Updates and Supervisory Priorities for 2022

    The Malta Financial Services Authority (MFSA) updated the guidelines on supervisory reporting requirements under the reporting framework 3.0.

    January 13, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 7875