BIS reviews guidelines on weak banks

MANILA, Philippines - The Basel Committee on Banking Supervision (BCBS) today published for comment the consultative document Supervisory guidelines for identifying and dealing with weak banks. 

The BCBS is under the Bank for International Settlements (BIS), considered the central bank of the world’s central banks.

The committee is updating its guidelines in light of the significant developments that have transpired in global financial markets and the global regulatory landscape since the financial crisis.

Once final, the guidelines will supersede the 2002 Committee guidance on the topic.

Key changes to the guidelines include: Emphasizing the need for early intervention and the use of recovery and resolution tools, and updating supervisory communication policies for distressed banks; providing further guidance for improving supervisory processes, such as incorporating macroprudential assessments, stress testing and business model analysis, and reinforcing the importance of sound corporate governance at banks; highlighting the issues of liquidity shortfalls, excessive concentrations, misaligned compensation and inadequate risk management; and, expanding guidelines for information-sharing and cooperation among relevant authorities.

Stefan Ingves, BCBS chairman and governor of Sveriges Riksbank, said that the weak banks are a worldwide phenomenon, and early identification and intervention by supervisors is critical in preventing an escalation of problems.

“The revised guidelines provide an important toolkit for supervisory authorities to deal with weak banks in a timely and effective manner,” Ingves added.

The BIS committee welcomes comments up to September on all aspects of this consultative document.