Basic principles of effective banking supervision

The Basic principles of effective banking supervision, also known as the Basel Core Principles (BCP), are minimum global standards for sound prudential regulation and supervision of banks and banking systems. The BCP Principles were originally published by the Basel Committee on Banking Supervision (BCBS) in 1997 and have been updated three times. There are 29 rules that apply to all banks in all jurisdictions. Prudential authorities use BCPs as a benchmark to assess the quality of their regulatory and supervisory frameworks and to help identify future work to achieve a baseline of sound supervisory practices. They are also used by the International Monetary Fund and the World Bank to assess the effectiveness of countries’ banking supervision systems as part of the Financial Sector Assessment Program (FSAP).

The latest update, conducted in 2024, reflects changes in regulation and supervision (e.g. reforms introduced by BCBS after the Great Financial Crisis), structural changes in banking (e.g. digitalization of finance) and lessons learned from previous FSAP assessments.

The concept of proportionality underlies all rules. Proportionality allows supervisors to tailor applicable rules and practices to the systemic importance and risk profiles of banks and the broader characteristics of their respective financial systems.¹ Proportionality therefore facilitates the universal application of BCP principles across a wide range of banks and banking systems.

This summary outlines the prerequisites for effective supervision and the 29 principles.

Conditions for effective banking supervision

BCPs identify six preconditions that may influence the conduct of supervision. While these preconditions are generally beyond the control of regulators, regulators should engage with the government and relevant authorities to address any concerns identified.

Powers, responsibilities and functions of supervisory authorities (PKK 1-13)

BCPs 1–13 focus on what supervisors themselves do, covering their powers, responsibilities and functions. BCPs 1-7 set out the relevant legal powers, institutional arrangements and requirements for the bank’s operations, licensing and ownership. BCPs 8-13 cover various tools and techniques to facilitate the sound supervision of banks and banking groups on and off premises.