Banking supervisors endorse new Basel Core Principles

International banking regulators, meeting in Mexico, have endorsed 25 updated Basel core principles for effective banking supervision.

At the biennial International Conference of Banking Supervisors (ICBS), central bankers and officials from 120 countries approved the new principles and discussed other current financial issues, including the implementation of Basel II.

Changes include a new principle addressing risk management across all areas, and strengthened criteria for assessing interest rate, liquidity and operational risk. Principles on money laundering, terrorism and fraud have also been reinforced, as has the need for greater cross-border co-operation between banking authorities. The review also stresses the importance of sound corporate governance, and the independence, accountability and transparency of banking supervisors.

Nout Wellink, Dutch central bank president and chairman of the Basel Committee, said: “[This] ensures that the principles will remain current and relevant.” Future assessments against the principles will use the updated text from now on, although those already underway will continue with the old version.

The conference at Mérida, on Mexico’s Yucatán peninsula, also included discussions on the implementation of the new Basel II capital guidelines. “We must remember that Basel II is more than a one-off exercise in getting the details and the numbers right,” Wellink said. “More than anything, it is a flexible framework that supports innovation over time, and provides appropriate incentives for improvements to risk management, supervision and disclosure.”

The next meeting will be held in Brussels in 2008.