Core Principles for Effective Banking Supervision: An Enforceable International Financial Standard?

Abstract

The Basel Committee on Banking Supervision serves as an international forum to discuss international bank supervision issues. Because of the gravity and frequency of banking crises since the demise of the Bretton Woods System in the early 1970s, international ªnancial standards have emerged as a method to minimize these crises. In 1998, the Basel Committee issued a comprehensive standard on bank super vision that built upon its work over the previous two and a half decades. In this Article, the author analyzes this comprehensive standard—the Core Principles for Effective Banking Supervision—and assesses its implementation in the European Union, the United Kingdom, France, the United States, and the Hong Kong SAR. The author then analyzes the options available to enforce this “soft law” and comments on the effec tiveness of these options, including the surveillance programs of the World Bank and the International Monetary Fund and certain provisions of the Revised Capital Accord of 2004. Despite the improvements repre sented by the Core Principles, the author suggests future changes in the international bank supervisory regime.