Basel Committee on Banking Supervision (BCBS)
The Basel Committee on Banking Supervision (BCBS) is the global standard-setter for the prudential regulation of banks. Hosted by the BIS, it writes the Basel framework on capital, liquidity and leverage that national regulators then put into law.
Also called: BCBS · Basel Committee · Basel standards · Basel III
The committee was set up by the central bank governors of the G10 at the end of 1974, after the failure of Bankhaus Herstatt showed how a bank collapse in one country could damage markets in others. Its members today are central banks and bank supervisors from 28 jurisdictions.
Its output is the Basel framework. Basel I (1988) set minimum capital against credit risk. Basel II refined how risk is measured. Basel III, written after the 2008 crisis, raised the quality and amount of capital and added a leverage ratio and two liquidity requirements. The committee also issues guidance on topics such as correspondent banking, operational resilience and banks' exposures to crypto-assets.
The committee has no legal authority of its own. Its standards bind a bank only when the bank's home jurisdiction adopts them. They still shape the market: how much capital a bank must hold against an activity largely decides whether it will offer that activity to payment firms and other clients.
In practice
Implementation dates and details differ between jurisdictions. A rule described as 'Basel III' may be in force in one country, delayed in another and modified in a third.
See also
- Bank for International SettlementsThe Bank for International Settlements (BIS) is an international institution in Basel, owned by central banks, that provides banking services to them and hosts the committees that write global standards for bank capital and payment infrastructure.
- Regulatory CapitalRegulatory capital is the minimum capital a licensed financial firm must hold, and keep holding, calculated by a method the regulator prescribes rather than by ordinary accounting. It is a continuing condition of the license, tested at application and at every examination afterwards.
- Herstatt RiskHerstatt risk is the risk in a foreign exchange trade that one party pays the currency it sold but never receives the currency it bought, because the counterparty fails in between. The full principal amount is at stake.
- Committee on Payments and Market InfrastructuresThe Committee on Payments and Market Infrastructures (CPMI) is the international standard-setter for payment, clearing and settlement systems. Hosted by the BIS, it brings together central banks to promote the safety and efficiency of the infrastructure that moves money.
- De-riskingDe-risking is a bank exiting a whole category of customer, such as money services businesses, crypto firms or particular corridors, rather than assessing and pricing each relationship on its own facts. Accounts close because of what the customer is, not what the customer did.