Part I The Elements of Bank Financial Supervision, 2 Why Are Banks Supervised?
- Bank resolution and insolvency — Bank supervision — Credit risk — Basel committee on Banking Supervision
This chapter begins by setting out the Core Principles for Effective Banking Supervision produced by the Basel Committee in September 1997, reissued in a revised version in October 2006, and further revised in the light of the crisis in 2012. The 2012 revision of these principles focused on four major areas: corporate governance within banks; an obligation on supervisors to ensure that banks are appropriately prepared for resolution; an obligation for supervisors to assess bank risks in the context of the macroeconomic environment; and the idea that supervisors should have higher expectations of banks which are globally systemically significant than for other banks. The discussions then turn to capital regulation, constraints on bank capital regulation, quantum of bank capital requirements, whether the banking crisis proves that risk capital-based regulation failed, market crisis and regulation, and protecting the public from the consequences of bank failure.