Basel Committee chair Erik Thedéen warned that fragmented banking supervision could make cross-border risks harder to identify and manage. He said information gaps would widen and opportunities for regulatory arbitrage would grow. He said financial risks were becoming more interconnected at precisely the time when international cooperation was becoming more difficult. Thedéen delivered the speech at the 24th International Conference of Banking Supervisors in Bali on 30 September.
Thedéen argued that global cooperation is itself a form of supervisory capacity. It allows authorities to share knowledge, compare practices and identify vulnerabilities developing across borders. Reuters also reported the warning.
STRONG RULES STILL NEED EFFECTIVE SUPERVISION
The Basel chair said capital, liquidity, sound governance, sustainable business models and early intervention remain essential. He also said strong supervision means having the mandate, independence, powers and determination to act, and that supervisors need the legal authority to intervene early.
Modern supervision, in his formulation, means having the people, information, technology and methods to act intelligently. He called for supervisory judgement to be structured, evidence-based and accountable. Confidentiality, he said, should not shield authorities from accountability for how they operate and assess their effectiveness.
IMPLEMENTATION AND COOPERATION REMAIN OPEN TASKS
Thedéen called for outstanding Basel III standards to be implemented fully, consistently and as soon as possible. He said stronger capital and liquidity had helped banks withstand the pandemic, the sharpest monetary tightening in decades, geopolitical shocks and the 2023 banking turmoil.
He said supervisors increasingly need to understand technology, cloud dependencies, cyber security, data governance and AI, as well as links between banks and non-bank financial intermediation.