The Basel Committee (BCBS) and the Basel Consultative Group (BCG) issued a joint statement specifying that they support the use of proportionality in implementing the Basel framework in a manner consistent with the Basel Core Principles. The core principles for effective banking supervision embed the role of proportionality, including that "supervisory practices should be commensurate with the risk profile and systemic importance of the banks being supervised." These principles are relevant for all banks and jurisdictions worldwide and provide the basis for a resilient banking system.
The statement emphasizes that a proportionate regulatory framework should not reduce the resilience of banks or dilute the prudential regulatory framework, but rather reflect the relative differences in risk and complexity across banks and the markets in which they operate. As the Basel Framework comprises minimum standards, jurisdictions are free to apply more conservative requirements. A proportionate framework should also consider supervisory capacity and resources, particularly when implementing more complex standards.
BCBS expects the Basel Framework (encompassing the Basel III standards) to be implemented in full by Committee member jurisdictions for internationally active banks. A recent BCBS stocktake of proportionality measures in place across jurisdictions highlighted that a majority of Committee and BCG jurisdictions already apply such measures. Moreover, proportionality can take different forms, including implementing the most appropriate approaches among those available in the Basel Framework for internationally active banks in member jurisdictions and implementing standards for banks in non-BCBS member jurisdictions that are broadly consistent with the principles of the applicable Basel standards.
Keywords: International, Banking, Basel III, Basel Core Principles, Proportionality, Basel Consultative Group, BCBS
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