What is BCBS?

The Basel Committee on Banking Supervision (BCBS) is the primary international standard for prudential regulation of banks. The committee runs a forum for regular cooperation on banking supervisory matters. The BCBS consists of 45 members, including bank supervisors and central banks from 28 jurisdictions.

The BCBS was created to address issues triggered by globalisation of banking and financial markets in times when banking regulation mostly remained under control of national regulatory bodies.

Predominantly, the committee assists national supervisory bodies for financial and banking markets, helping to elaborate a globalised approach to solving regulatory problems.

BCBS meaning and history

To define BCBS’s meaning we should refer to its history. Initially named the Committee on Banking Regulation and Supervisory Practices, BCBS was established by the governors of central banks from the Group of Ten countries (G10) in 1974.

Headquartered at the Bank for International Settlements in Basel, the Committee was created to improve financial stability and banking supervision quality around the world. It served a forum for regular cooperation of its member states on various banking supervisory issues.

The Committee’s first meeting happened in February 1975. Since then the BCBS’s forums have been held regularly three or four times a year. Today, its member countries include: Argentina, Australia, Belgium, Brazil, Canada, China, France, Hong Kong, Indonesia, Italy, India, Germany, Japan, Korea, Luxembourg, Mexico, the Netherlands, Russia, Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States.

Basel Accords: Basel I, Basel II and Basel III

The Basel Committee on Banking Supervision (BCBS) issued a series of very important and widely accepted policy recommendations also referred to as the ‘Basel Accords’.  They are not binding and national policymakers must adopt them in their countries to be enforced, however, they form the basis of capital requirements for banks among the committee’s member states and beyond.

The first Basel Accords, also known as Basel I, was formulated in 1988 and adopted by G10 countries by 1992. It accumulated methodologies for estimating banks’ credit risk and shared suggested minimum capital requirements in order to keep banks solvent during the financial crisis.

Basel II followed Basel I in 2004 and was still being implemented during the financial crisis of 2008. The third iteration, Basel III tried to correct the miscalculations, which could have contributed to the crisis. The banks were required to hold a higher percentage of their assets in more liquid forms and to fund themselves with more equity than debt. Basel III was first approved in 2011 and completed in 2017, with the publication of new standards of capital requirements for credit risk and operational risk.