Basel Committee on Banking Supervision

The Basel Committee on Banking Supervision (BCBS) was founded in Basel at the end of 1974 and is located at the Bank for International Settlements (BIS). The Committee is made up of representatives of the central banks and banking supervisory authorities of 27 countries. Switzerland is represented on the Committee by FINMA and the Swiss National Bank (the SNB). The Basel Committee is the central body for the international coordination of banking regulation and acts as a forum for collaboration to discuss banking supervision. Its main objective is to enhance banking supervision, thereby promoting financial stability.

Global regulatory framework

Drawing on the lessons of the recent financial crisis, the Basel Committee published a reform package in 2010 called Basel III to bolster capital and liquidity requirements. Parts of the package came into force from 2013. In December 2017, the Basel Committee published its final Basel III standards. These are due to come into effect in 2022 according to the international timetable. The objective is to enhance the stability of the financial system by means of three pillars.

The three pillars of Basel III

Pillar 1 defines eligible capital and methods for calculating the minimum capital requirements for credit, market and operational risks. As a result of Basel III, stricter requirements now apply to eligible capital with respect to loss absorption capacity and the minimum capital requirements have been tightened. Other innovations are the capital conservation buffer, the introduction of the countercyclical capital buffer and an unweighted leverage ratio to complement the risk-oriented minimum capital requirements. Pillar 2 covers the supervisory review process which ensures that banks have sufficient capital to back all risks and also requires appropriate management of these risks. Pillar 3 defines minimum disclosure obligations for banks. Furthermore, new binding standards have also been defined for liquidity management for all banks and capital requirements for systemically important financial institutions.

Implementation in Switzerland

In Switzerland, the Basel III standards have been implemented by adapting the Capital Adequacy and Liquidity Ordinances and the relevant FINMA circulars. The Basel III provisions have been entering into force incrementally since 2013. The national implementation of the final Basel III regulations will be executed under the leadership of the Federal Department of Finance (FDF).