♦Endorses initiatives in response to the turmoil, including prioritising strengthening supervisory effectiveness, pursuing additional analytical work, and assessing the need to explore policy options over the medium-term.

♦Welcomes progress made in implementing Basel III and reiterates its expectation to implement all aspects of the Basel Framework in full, consistently, and as soon as possible.

The Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of the Basel Committee on Banking Supervision, met on 11 September to take stock of the lessons learnt from the recent banking turmoil and review the implementation status of outstanding Basel III standards.

Banking turmoil lessons learnt

The banking turmoil of March to May 2023 was the most significant system-wide banking stress since the Great Financial Crisis (GFC) in terms of scale and scope. The stress experienced by individual banks, while having largely distinct causes, triggered an assessment of the resilience of the broader banking system. Swift intervention by public authorities, along with the increased resilience of the global banking system since the GFC, mitigated the impact of the turmoil.

In response, the Committee completed a stocktake of the regulatory and supervisory lessons of the turmoil. The GHOS endorsed the Committee's stocktake, which underlined the following:

♦The importance of banks' risk management practice and governance arrangements as the first and most important source of financial and operational resilience.

♦The role of strong and effective supervision in overseeing the safety and soundness of banks. It is critical that supervisors act early and effectively to identify and promptly correct weaknesses in bank practices.

♦The critical importance of a prudent and robust regulatory framework in safeguarding financial stability.

The GHOS agreed to publish the Committee's stocktake report.

The GHOS also discussed the implications of the turmoil for the Committee's work programme. It endorsed a series of follow-up initiatives, including:

♦Prioritising work to strengthen supervisory effectiveness and identifying issues that could merit additional guidance at a global level.

♦Pursuing additional follow-up analytical work based on empirical evidence, to assess whether specific features of the Basel Framework performed as intended during the turmoil, such as liquidity risk and interest rate risk in the banking book.

Basel III implementation

The already implemented Basel III reforms helped shield the global banking system and real economy from a more severe banking crisis. These events once again underscored the importance of implementing the outstanding Basel III standards.

The GHOS took stock of the implementation status of the outstanding Basel III reforms, which were finalised in 2017. Members have continued to make good progress with implementation. Around a third of BCBS member jurisdictions have implemented all, or the majority of the standards, while two thirds plan to implement them by the end of 2024, and the remaining jurisdictions in 2025.

GHOS members unanimously reaffirmed their expectation of implementing all aspects of the Basel III framework in full, consistently, and as soon as possible. The GHOS tasked the Committee with continuing to monitor and assess the full and consistent implementation of Basel III.