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From an international regulatory and supervisory perspective, standard-setting bodies, such as the Financial Stability Board and the Basel Committee on Banking Supervision, continued their respective processes of developing and issuing guidance and standards to strengthen the resilience of the financial sector in general and the banking sector in particular. The Department, as always, closely monitored and considered developments on the international regulatory and supervisory fronts in an on-going effort to promote the soundness of the domestic banking sector through the effective and efficient application of international regulatory and supervisory standards.
Basel Capital Accord
On 26 June 2004, the Basel Committee issued the publication titled International Convergence of Capital Measurement and Capital Standards: A Revised framework, commonly referred to as ‘Basel II’. It represents the culmination of more than five years’ work by the Basel Committee.
Basel II seeks to set significantly more risk-sensitive capital requirements (in respect of operational risk as well) and is aimed at greater international convergence through capital requirements and better disclosure, thus enhancing the role of market discipline; and to ensure improved supervisory processes and procedures.
The Basel II framework has been subject to continuous refinement, resulting in what is commonly referrred to as Basel III.
Basel III is a comprehensive set of reform measures, developed by the Basel Committee on Banking Supervision, to strengthen the regulation, supervision and risk management of the banking sector. These measures aim to:
- improve the banking sector's ability to absorb shocks arising from financial and economic stress, whatever the source
- improve risk management and governance
- strengthen banks' transparency and disclosures.
The reforms target:
- bank-level, or microprudential, regulation, which will help raise the resilience of individual banking institutions to periods of stress.
- macroprudential, system wide risks that can build up across the banking sector as well as the procyclical amplification of these risks over time.
The compilation of document that form Basel III is available at the following link:
Basel III
Core Principles for effective Banking Supervision
The Core Principles for Effective Banking Supervision, developed by the Basel Committee on Banking Supervision (the Committee) in cooperation with fellow supervisors, have become de facto the standard for sound prudential regulation and supervision of banks. The Core Principles are mainly intended to help countries assess the quality of their systems and to provide input into their reform agenda.
An assessment of the current situation of a country’s compliance with the Principles can be considered a useful tool in a country’s implementation of an effective system of banking supervision.
The Core Principles are available from additional information.
South Africa’s compliance with the Core Principles were assessed by the IMF/World Bank during December 2010 and their report is available from additional information.