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Banking
> Articles> The Basle Committee
Basle Committee
It is a committee of banking supervisory authorities, which has established by the Central bank
Governors of the group of Ten countries in 1975. It consists of senior representatives of bank
supervisory authorities and central banks from: Belgium, Canada, France, Italy, Japan,
Luxembourg, Netherlands, Switzerland, Sweden, UK and USA. It usually meets at the Bank for
International settlements in Basle, where its permanent secretariat is located.
The committee has stipulated in the five sections, the following eleven principles for banking
supervisory authorities to apply in assessing bank's management of interest rate risk.
Principle-1
Board of Directors, should approve strategies and policies with respect to interest rate, risk
management and ensure that senior management takes the steps necessary to monitor and
control these risks.
Principle-2
Senior management must ensure that appropriate
policies/procedures/ resources are available.
Principle-3
Banks should clearly define the individuals/committees responsible for
managing interest rate risks. Larger/complex Banks should have independent unit for administration/design of Banks
interest rates/risk measurement, monitoring and control functions.
Principle-4
Banks interest rate, risk policies and procedures be clearly defined and consistent with nature and
complexity of their activities. Policies should be applied on the consolidated basis.
Principle-5
New products/activities to be introduced subject to adequate procedures and controls.
Principle-6
Assumptions underlying the system should be clearly understood by risk managers and Bank
management.
Principle-7
Banks must establish and enforce operating limits and other practices that maintain exposures
within levels consistent with their internal policies.
Principle-8
Banks should measure their vulnerability to loss under stressful market conditions including the
breakdown of key assumptions and consider their results at the time of review of policies.
Principle-9
Banks must have adequate information systems for measuring, monitoring, controlling and
reporting interest rate exposures.
Principle-10
Banks must have an adequate system of internal controls i.e. regular
independent reviews and evaluations.
Principle-11
Supervisory authorities should obtain from banks sufficient and timely information.
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