Form can come to dominate substance and, in those circumstances, such standards can become an impediment to sensible risk management rather than an aid. In essence, the risk is that those responsible for the management of banks or other enterprises stop thinking about the underlying risks their businesses face and, instead, become focused on what is required to conform to the regulators’ standards.
Strengthening financial systems A number of different agencies have fingers in this particular pie. The Basel Committee of Banking Supervisors is reviewing gaps in its existing framework. The work underway includes data related issues, methods for dealing with weak banks, disclosure standards, financial sector safety nets, licensing, governance plus legal and judicial issues. In addition, a review of the 1988 Capital Accord is underway.