Compliance with BSBC Regulations by the Banks in Sri Lanka

Abstract

The Basel Committee’s Role Most of the global banking and insurance regulations have been initiated or inspired by the work of the Basel Committee on Banking Supervision and its so-called “Basel regulations”. The Basel Committee on Banking Supervision (BCBS) was established in 1974 in response to a period of major disruptions in the international currency and banking markets (1971 collapse of the Bretton Woods Accord, 1973 stock market crash, 1974 oil price shock). BCBS members are drawn from 27 countries which are represented by their central banks and financial regulators. The Committee aims to enhance understanding of key supervisory issues and improve the quality of banking supervision worldwide. It achieves this partly through its role as a forum for cooperation and information sharing for national supervisors, and partly by issuing guidelines and standards. The Committee does not have formal supranational authority and its standards do not have legal force. Rather, it is expected that national supervisors incorporate these standards into their regulations, with which regulated institutions then have to comply. Basel regulations are also adopted by non-member BCBS countries that see benefits both in the regulations themselves and also in being associated with conformity with Basel standards. The BCBS actively encourages contact and cooperation between its members and other banking supervisors. Whilst at different stages of implementation, many countries are now applying Basel guidelines. In today’s global business environment, international coordination has become increasingly important. Application of the same standards across countries allows for consistent comparisons by investors and creditors, thereby supporting market confidence. Whilst this can be particularly relevant for banks in emerging markets, the recent sub-prime and sovereign crises have highlighted the dependence of some of the largest industrialised economies on their banking systems and thus the importance of global coordination.The BCBS is best known for its international standards on capital adequacy which have evolved from Basel I, issued in 1988, through Basel II issued in 2004, to its latest enhancements issued in 2010, commonly called “Basel III”. Full compliance with Basel III is required by 1 January 2019.