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What is the Basel Committee on Banking Supervision?

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  • Written By: Mary McMahon
  • Edited By: Kristen Osborne
  • Last Modified Date: 18 September 2016
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The Basel Committee on Banking Supervision is an international organization that develops recommendations for improving banking standards and regulations with the goal of creating a level playing field across the international financial community. It includes representatives from a number of nations and is part of the Joint Forum, a group of agencies in charge of improving oversight and standards for the financial industry around the world.

The inspiration for establishing the Basel Committee on Banking Supervision occurred in 1974, when a German bank experienced a financial crisis, leading regulators to move to shut it down. The bank's outstanding payments to banks in the United States had not gone through by the time of the closure because of the time difference, leading American banks to protest. The need for international oversight with particular concern to cases involving multiple jurisdictions became obvious, and financial officials worked to create the Basel Committee on Banking Supervision.

Members of the Basel Committee meet four times a year in Switzerland to discuss pressing issues. The organization is not regulatory in nature and does not have the ability to pass, implement, or enforce law. It can, however, make recommendations. Using input from member nations, it attempts to develop reasonable standards to address a variety of needs and concerns. These can include everything from recommendations on reserve requirements to guidelines for processing international banking disputes. It makes regular publications with specific recommendations available to members of the public, as well as the global financial community.

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Four groups within the Basel Committee on Banking Supervision focus on different topics of interest. The Standards Implementation, Basel Consultation, and Policy Development groups include representatives from a number of different nations, as does the Accounting Task Force. These groups identify emerging concerns, work on creating policy framework for helping nations pass and enforce better financial regulations, and monitor ongoing issues to determine whether additional action is necessary.

Nations that do not belong to the Basel Committee on Banking Supervision can still access information through the organization and may choose to adopt recommendations that seem suitable for their needs. The group also provides outreach and education, working with financial representatives from non-member nations to assist them with policy concerns and other issues. This organization works to strengthen the global economy, increase consumer and investor confidence, and eliminate unfair advantages created by mismatched regulation, like differing reserve requirements in various countries that might lead financial institutions to preferentially do business in the region with the lower requirements.

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