Financial Services Advisory

What’s Next for the Global Banking System? The Basel Committee’s 2023-2024 Strategic Priorities

Dwayne Price
insight featured image

The Basel Committee on Banking Supervision—the primary global standard setter for the prudential regulation of banks—has identified five strategic priorities for best practices that are of great importance to the banking sector in these post-pandemic years. These priorities mainly focus on assessing and mitigating the risk and vulnerabilities affecting the global banking system.

To assist the banking sector in navigating these key concerns and helping it to prepare for—and remain resilient when face with—future challenges, the Basel Committee’s work programme will supervise and implement activities for each priority area as part of its two-year plan.

Below is a high-level summary of these priorities and their activities.

Basel Committee Priority One: Emerging Risks and Horizon Scanning

The banking sector is operating against a back of uncertainty and growing risks: rising geopolitical tensions, stagflation, cross-border spill overs and more.

The Committee will pursue a forward looking approach to identify and analyse risks and vulnerabilities to the banking system. It will conduct a series of horizon-scanning activities related to emerging risks, and it will also continue to evaluate the banking turmoil caused by recent events—as well as the regulatory and supervisory implications of these events—and use this analysis to assess the robustness of the system.

Basel Committee Priority Two: Digitalisation of Finance

As digital assets and currencies continue to evolve, they can bring risk, opportunity and disruption to the banking sector.

The Committee will pursue a variety initiatives focused on the analytical, policy and supervisory-related aspects of the digitalisation of finance. It will review a wide range of technological developments such as the new entrants and suppliers in the banking system, the use of AI and machine learning, and big data and government arrangements. It will also continue its work related to crypo-assets and blockchain technology.

Basel Committee Priority Three: Climate-related Financial Risks

The disruption brought about by climate change continues to create risks for multiple sectors including the global banking system.

The Committee will take a holistic approach—working across three pillars of regulation, supervision and disclosure—to tackle climate-related financial risks to the system. For regulation, it will pursue ongoing analytical work to assess the materiality gaps in the existing Basel framework and consider additional regulatory measures. For supervision, the Committee will monitor the implementation of its Principles for the risk of effective management and supervision of climate-related financial risks. For disclosure, it will continue its work with the International Sustainability Standards Board, aiming to develop a set of bank-specific disclosure requirements.

Basel Committee Priority Four: Monitoring and Review of Existing Standards and Guidance

With regards to monitoring and reviewing existing standards and guidance, the Committee will remain focused on a set of targeted initiatives. It will review the supervisory insights and structural changes that have occurred since the 2012 update to the core principles for effective banking. It will also review its supervisory guidance and principles with regards to banks’ interconnections with non-banking financial intermediation, and it will develop updated supervisory principles on banks’ outsourcing practices and their reliance on third- and fourth-party service providers.

Basel Committee Priority Five: Implementation and Evaluation

The Committee will continue to prioritise a timely, consistent implementation of Basel III, the reforms of which have helped contain the fallout of the recent banking stress events. It will also implement the outstanding Basel III standards in a full and consistent manner towards preserving resiliency of the banking system.

For more information, read the Basel Committee’s strategic priorities 2023-2024.