Banking Sector Risks and Vulnerabilities in Ireland: Basel Committee Identifies Key Concerns

The global banking sector is facing unprecedented risks and vulnerabilities, with rising geopolitical tensions, stagflation, cross-border spill overs, and more posing significant challenges. To mitigate these threats, the Basel Committee on Banking Supervision has identified five strategic priorities for best practices to ensure the stability of the financial system.

Priorities for a Resilient Financial System

According to a recent report, the Basel Committee’s two-year plan will focus on implementing activities in each priority area to assist the banking sector in navigating key concerns and preparing for future challenges. The priorities include:

Assessing and mitigating emerging risks
Digitalization of finance
Climate-related financial risks
Monitoring and reviewing existing standards and guidance
Implementation and evaluation

Priority One: Emerging Risks and Horizon Scanning

The Basel Committee will take a forward-looking approach to identify and analyze risks and vulnerabilities affecting the banking system. The committee will conduct horizon-scanning activities related to emerging risks and evaluate the impact of recent events on the financial system, using this analysis to assess the robustness of the system.

Priority Two: Digitalization of Finance

As digital assets and currencies continue to evolve, they pose significant risks, opportunities, and disruptions to the banking sector. The Basel Committee will pursue initiatives focused on analytical, policy, and supervisory aspects of digitalization, including:

Reviewing technological developments such as AI and machine learning
Analyzing big data and government arrangements

The disruption caused by climate change poses significant risks to multiple sectors, including the global banking system. The Basel Committee will take a holistic approach to tackle climate-related financial risks, working across three pillars of:

Regulation
Supervision
Disclosure

This includes ongoing analytical work to assess materiality gaps in the existing Basel framework and considering additional regulatory measures.

Priority Four: Monitoring and Review of Existing Standards and Guidance

The Basel Committee will review supervisory insights and structural changes since the 2012 update to core principles for effective banking. The committee will also:

Review its supervisory guidance on banks’ interconnections with non-banking financial intermediation
Develop updated supervisory principles on banks’ outsourcing practices

Priority Five: Implementation and Evaluation

The Basel Committee will prioritize timely, consistent implementation of Basel III reforms, which have helped contain the fallout from recent banking stress events. The committee will also implement outstanding Basel III standards in a full and consistent manner to preserve the resilience of the banking system.

Learn More

For more information on the Basel Committee’s strategic priorities 2023-2024, please visit their website: [insert link]