The banking system is largely fixed and the world is trying to move on from the aftermath of the global financial crisis by focusing on economic growth, which raises questions over the relevance of the Basel Committee on Banking Supervision.
The financial crisis thrust the Basel Committee on Banking Supervision (BCBS) into the front line of building a more robust global banking system. But is such an institution needed any more, given that banks are more stable and national priorities are shifting towards economic growth?
The answer is a resounding yes, even in the highly unlikely event that there’s never again another global financial crisis. Basel III creates a more even playing field for global banks, allowing international capital to flow more freely to where it is needed, and that is vital for the economic growth politicians so desperately want.
However, the future isn’t without challenges for the BCBS. For one thing, technology is reshaping banking and creating new types of players and business models – some yet to be imagined – which also means new risks. The Basel framework may need tweaks to reflect those changes, and the committee is best placed to do the tweaking.
Then there’s nationalism, which is fashionable again. This is a risk for the BCBS, particularly if it is hijacked by the elements in the Trump administration who believe economic growth is about more, and easier, credit. This would undermine the committee’s independence, and its credibility.
Overall, the BCBS plays a role vital to the global economy and cannot realistically be replaced by some form of state-mandated body. But it will need to evolve in line with a more data-driven banking system. It must also increase its membership to more than 28 jurisdictions if it is to stay relevant in a world where the baton of economic leadership is rapidly passing to emerging markets.
In future, the BCBS will be a much less Western-dominated organisation and will be more focused on the needs of emerging markes, whose priority is financial inclusion. It may also need to employ some senior technologists to keep it abreast of the evolving banking sector.
