BCCI: THE LESSONS FOR BANK SUPERVISORS PART 2: DEFICIENCIES IN INTERNATIONAL SUPERVISORY ARRANGEMENTS
| Pages | 298-313 |
| DOI | https://doi.org/10.1108/eb024778 |
| Published date | 01 January 1993 |
| Date | 01 January 1993 |
| Author | MAXIMILIAN J.B. HALL |
| Subject Matter | Accounting & finance |
BCCI: THE LESSONS FOR BANK SUPERVISORS*
PART 2: DEFICIENCIES IN INTERNATIONAL SUPERVISORY
ARRANGEMENTS
Received: 16th November, 1992.
DR
MAXIMILIAN
J. B.
HALL
DR HALL
GRADUATED WITH A FIRST CLASS HONOURS
DECREE IN' ECONOMICS FROM NOTTINGHAM
UNIVERSITY IN 1975. HE RECEIVED A PHD
FROM THE SAME UNIVERSITY IN 1978. HE
JOINED THE STAFF OF THE ECONOMICS
DEPARTMENT AT LOUGHBOROUGH
UNIVERSITY IN 1977 AND IS CURRENTLY A
SENIOR LECTURER IN THAT DEPARTMENT.
DR HALL HAS PUBLISHED FIVE BOOKS (ONE
CO-AUTHORED) IN THE AREAS OF MONEY,
BANKING AND FINANCE, WITH A FURTHER
THREE DUE FOR PUBLICATION LATER THIS
YEAR. HE HAS ALSO CONTRIBUTED SOME 40
ARTICLES TO ACADEMIC AND PROFESSIONAL
JOURNALS. HIS CURRENT RESEARCH
ACTIVITIES EMBRACE UK BANKING
SUPERVISION, CENTRAL AND COMMERCIAL
BANKING DEVELOPMENTS IN THE UK, USA,
JAPAN AND THE EC AND FINANCIAL
REGULATORY ISSUES IN GENERAL.
ABSTRACT
This is the second of a two-part paper, the
first part of which was published in The
International Journal of Regulatory
Law & Practice Volume 1 Number
2,
pp.
170-184.
This part considers some of the multi-
national initiatives that have been under-
taken for the supervision of international
banks both within the EC and outside it.
Deficiencies in the international arrange-
ments for bank supervision are noted
before
some suggestions for
reform
are set out.
The author concludes with a timetable
of events outlining BCCI's history.
BACKGROUND
Apart from any bilateral agreements
which may exist, a number of multi-
lateral initiatives have emerged over
the last 20 years or so to shape the
*An earlier version of this paper was
presented at the 'International Confer-
ence on Business and Economic
Development in Middle Eastern and
Mediterranean Countries' held in
Valetta, Malta during 25th-27th May,
1992,
and organised by the Foundation
for International Studies of the
University of Malta.
298
THE INTERNATIONAL JOURNAL OF REGULATORY LAW
&
PRACTICE • VOLUME ONE NUMBER THREE
-HALL-
form of international cooperation
on the supervision of international
banks.
These developments took
place both within and outside the
EC.
For the former, the Groupe de
Contact and the Banking Advisory
Committee (see below) work along-
side the Commission in shaping the
Community's approach on super-
visory co-ordination; while for the
latter, the Basle Committee of
Supervisors (see below) has been the
dominant force in the promulgation
of guidelines governing inter-
national supervisory co-operation.
Thanks to the efforts of these organ-
isations, the majority of internation-
ally active banks are now governed
by much the same supervisory
regime whatever their place of
incorporation.
EC DEVELOPMENTS
The first advisory body to be set up
(in 1972) was the Contact Group of
EC Supervisory Authorities (Groupe
de Contact), an informal club com-
prising the supervisory authorities of
the Member States. Its role is to pro-
vide a forum for the exchange of
views by national supervisors so as
to achieve closer understanding of
supervisory practices and promote
practical co-operation. It commis-
sions its own research studies and
submits reports to the Banking Advi-
sory Committee and the EC Com-
mission. The Commission also
receives advice from the Banking
Advisory Committee, which com-
prises representatives (not more
than three) from each Member State
and the Commission. Set up in 1979,
as required by the First Banking Co-
ordination Directive of 1977 (77/780/
EEC),
this committee is responsible,
along with the Commission, for
determining general policy guide-
lines for the Community in respect
of supervisory co-ordination. Tech-
nical assistance is available from the
Contact Group, if needed. Finally,
close contact with both the Basle
Committee of Supervisors and indi-
vidual national regulators is also
maintained by the Commission.
Having taken advice from all
these sources the Commission
usually proceeds by issuing either
recommendations or directives, the
latter alone carrying legal force. (The
Commission can also make decisions
or propose legally binding regula-
tions.) Given the disappointing
results achieved by early recom-
mendations, albeit in the non-finan-
cial sector, and the mixed results
that followed the issue of a recom-
mended Code of Conduct for Secur-
ity Markets, the Commission
determined to proceed mainly by
way of issuing directives after 1972.
The establishment
of the
Basle Committee
of Supervisors
The wave of uncertainty that fol-
lowed the Herstatt affair1 and other
financial crises2 in 1974 led Euro-
pean central bank governors in Sep-
tember of that year to issue a joint
statement reassuring the markets
that adequate temporary liquidity
support facilities were available: 'it
would not be practical to lay down
in advance detailed rules and proce-
dures for the provision of temporary
liquidity . . . satisfied that means are
available for that purpose and will
be used if and when necessary'. At
the same time a standing committee
of bank supervisors from the Group
of Ten countries plus Switzerland
and Luxembourg was formed under
the auspices of the Bank for Inter-
299
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