The principles-based approach attempts to limit hard-coded law and regulations to broad statements of principle. For example, the law might identify the need for banks to implement sound risk management frameworks.
However, rather than trying to identify every feature of such a system, the principles-based approach allows the supervisor to develop its framework and its own understanding of best practice in line with the principles. Given the pros and cons of two approaches, SBP will try to strike a balance between these two philosophies.