The Basel Committee on Banking Supervision today issued a consultative document entitled The compliance function in banks. It provides basic guidance for banks and sets out banking supervisors’ views on compliance in banking organisations. Comments are due by 31 January 2004.
The document explains that compliance with laws, rules and
standards helps to maintain a bank’s reputation with, and thus meet the
expectations of its customers, the markets and society as a whole. Compliance
risk management has become more formalised within the past few years and has
emerged as a distinct risk management discipline.
The purpose of the compliance function is to assist a bank in managing its
compliance risk - the risk of legal or regulatory sanctions, financial loss, or
loss to reputation a bank may suffer as a result of its failure to comply with
all applicable laws, rules and standards.
Mr Jaime Caruana, Chairman of the Basel Committee and Bank of Spain
Governor remarked “That banks comply with laws and regulations is a key
expectation from banking supervisors. Banking supervisors must be satisfied that
effective compliance policies and procedures are followed and that management
takes appropriate corrective action when breaches are identified.”
Prof Arnold Schilder, member of the Basel Committee,
Chairman of its Accounting Task Force and Executive Director at the Netherlands
Bank, noted the importance of a proactive compliance function. He said
"Boards of directors and senior management should promote an organisational
culture which ensures compliance by all employees when conducting the business
of the bank."
The consultative document is now available on the BIS website at
www.bis.org. Comments should be submitted to the Secretariat
of the Basel Committee on Banking Supervision at the Bank for International
Settlements, CH-4002 Basel, Switzerland. Comments are also invited by e-mail:
baselcommittee@bis.org or by fax: +41 61 280 9100.
Basel Committee on Banking Supervision
The Basel Committee on Banking Supervision was established by the central bank Governors of the Group of Ten countries in 1975. It consists of senior representatives from banking supervisory authorities and the central banks of Belgium, Canada, France, Germany, Italy, Japan, Luxembourg, the Netherlands, Spain, Sweden, Switzerland, the United Kingdom and the United States. Currently, the Committee reports to the central bank Governors and heads of supervision of the G10 countries. Mr Caruana succeeded William J McDonough as Chairman of the Basel Committee on Banking Supervision as of 1 May 2003. Nicholas Le Pan, Superintendent of Financial Institutions Canada, serves in the newly established position of Vice Chairman of the Committee. The Committee usually meets at the Bank for International Settlements (BIS) in Basel, where its permanent Secretariat is located.
The Accounting Task Force comprises experts from Basel Committee member institutions and outside observers. It has the lead responsibility in the Committee's consideration of accounting and auditing issues.