Basel Committee releases final draft of banking compliance guide

The main revision from the original draft, published in October 2003, is the refinement of the principles for smaller banks that have simpler and less expansive compliance issues. “We have further refined and clarified our approach. In particular, the operational implications for smaller banks that cannot – and do not need to – put in place the same structure and processes necessary in larger or more complex institutions,” said Arnold Schilder, member of the Basel Committee and executive director at De Nederlandsche Bank.

Schilder added that the decision to publish a principles-based guide, as opposed to a prescriptive document, was a conscious decision made when it issued the first draft.

The committee stressed that the paper, entitled 'Compliance and the compliance function in banks', is not designed to restrict banks to a single organisational or operational approach to compliance. But it does state that banks must be prepared to demonstrate how the approach they adopt will be effective in dealing with their own compliance risk challenges.

“Compliance has emerged as a distinct branch of risk management within the banking system, and banking supervisors have recognised the need to communicate fundamental supervisory expectations in this important and sensitive area," said Jaime Caruana, chairman of the Basel Committee and governor of the Bank of Spain. "The committee believes this paper will provide banks with essential tools to meet these expectations.”

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