International standards of banking activity
Introduction
International Financial Reporting Standards (IFRS) set out the basic principles, rules and requirements that contribute to the stability and security of the global financial system. These standards are aimed at improving the quality of banking supervision, risk management and consumer protection. In this article, we will review the main international banking standards, their legal basis, principles and implementation mechanisms.
Key international organisations and standards
Basel Committee on Banking Supervision (BCBS)
The Basel Committee on Banking Supervision (BCBS) is the main international body that develops banking supervision standards. The BCBS was established by the Bank for International Settlements (BIS) in 1974. The main BCBS standards include:
- Basel I: introduced in 1988, this standard sets minimum capital requirements for banks to cover credit risks.
- Basel II: introduced in 2004, this standard expands capital requirements to include market and operational risks. It is based on three main pillars: minimum capital requirements, supervisory process, and market discipline.
- Basel III: Adopted in 2010, this standard strengthens capital quality requirements, introduces additional capital buffers and liquidity requirements, and tools to limit systemic risks.
Financial Stability Board (FSB)
The Financial Stability Board (FSB) was established in 2009 on the basis of the Financial Stability Forum. The FSB coordinates the work of national financial authorities and international standards to ensure the stability of the global financial system. The FSB's main activities include:
- Development of financial risk management standards.
- Coordinating the implementation of financial system reforms.
- Monitoring of systemically important financial institutions.
International Monetary Fund (IMF)
The IMF plays an important role in ensuring the stability of the international financial system by providing financial assistance to countries facing economic difficulties and developing standards for banking activities. The main IMF standards include:
- Financial Sector Assessment Programmes (FSAPs): assessing the financial soundness and efficiency of national financial systems.
- Codes and Principles: the development of codes and principles to ensure the stability of financial systems, such as principles for effective banking supervision and risk management.
International Organisation of Securities Commissions (IOSCO)
IOSCO develops standards for the regulation of securities markets, including banks engaged in securities transactions. The main IOSCO standards include:
- Principles for the regulation of securities markets: establishing requirements for transparency, market discipline and investor protection.
- Codes of Conduct: development of codes of conduct for securities market participants to prevent manipulation and abuse.
Basic principles of international banking standards
Principles for Effective Banking Supervision (Basel Committee)
The Basel Committee has developed 29 principles of effective banking supervision that serve as a guide for national regulators. The main principles include:
- Aims and objectives: defining clear goals and objectives of banking supervision.
- Powers, independence and resources: ensuring that regulators have the necessary powers, independence and resources.
- Licensing: establishing licensing requirements for banks.
- Management suitability: assessing the qualifications and experience of bank management.
- Risk management: implementing effective risk management systems.
- Capital and reserves: ensuring that banks hold sufficient capital and reserves.
- Inspections and monitoring: regular inspections and monitoring of banks' operations.
- Remedial actions: application of remedial actions in case of violations.
Risk management principles (Financial Stability Board)
The FSB develops risk management principles aimed at reducing systemic risks and ensuring the stability of the financial system. The main principles include:
- Risk identification and assessment: implementation of risk identification and assessment systems.
- Monitoring and control of risks: regular monitoring and control of risks, implementation of risk management mechanisms.
- Stress testing: conducting stress tests to assess the banks' resilience to negative scenarios.
- Risk appetite and policies: determining risk appetite and developing risk management policies.
Principles of transparency and disclosure (IOSCO)
The IOSCO develops principles of transparency and disclosure to ensure market discipline and protect investor rights. The main principles include:
- Transparency ofoperations: ensuring transparency of banks' operations in the securities markets.
- Financial disclosure: disclosure of complete and reliable financial information on the activities of banks.
- Investor protection: implementation of mechanisms to protect investors' rights, including disclosure of risks and potential losses.
Implementation of international standards in Ukraine
The role of the National Bank of Ukraine (NBU)
The National Bank of Ukraine plays a key role in the implementation of international banking standards. The main tasks of the NBU include:
- Regulatory development: development and implementation of regulations that are in line with international standards.
- Banking supervision: conducting banking supervision in accordance with the principles of the Basel Committee and other international standards.
- Risk assessment: implementation of risk management and stress testing systems.
- Transparency and disclosure: ensuring transparency of banks' operations and disclosure of financial information.
Challenges and prospects
The implementation of international banking standards in Ukraine is accompanied by a number of challenges, including
- Adaptingto national conditions: adapting international standards to the specifics of the national economy and banking system.
- Staff development: training and professional development of bank and regulatory staff.
- Ensuring compliance with regulations: harmonisation of national legislation with international standards.
Prospects for the implementation of international standards include increasing the stability and reliability of the banking system, attracting foreign investment and strengthening consumer confidence in financial institutions.
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