Introducing the Basel Core Principles for Banking Supervision After this Document and capital standards, the

Basel Committee worked on developing general and comprehensive core principles for effective banking supervision together with the representatives of its member states and in close cooperation with supervising authorities of other non-member countries from all over the world. At the same time different world regional groups of supervisors provided their support to this project and agreed to support the adoption of the principles by their member states. Among those groups the most important ones are: the Arabic Committee for Banking Supervision; Group of the Caribbean Banking Supervision; the Association of the Banking Supervision Institutions of Latin America and the Caribbean, the Group of Banking Supervisors of Eastern and South Africa, EMEAP study group for banking supervision, the Group of banking supervisors from the countries of Central and Eastern Europe (Federation Banking Agency has been a member for 7 years), the Gulf Cooperation Council of banking supervisors, the Offshore Group of banking supervisors, the Regional Supervising Group of Central Asia, SEANZA Forum of banking supervisors, the Committee of Banking Supervisors of Western and Central Africa. Finally, in September 1997 the Committee adopted the document entitled Core Principles for Effective Banking Supervision (hereinafter: the Basel Principles), which remained in its unmodified version until 2006, when it went through a significant revision because of the changes of the first document which had set frameworks for bank capital standards. This document set general principles and prudential rules for a regulatory role of bank supervision which have to ensure sound and successful bank operations. It consisted of twenty-five core principles categorized in 7 related groups covering the following areas: 1. 2. 3. 4. 5. 6. 7. Preconditions for effective banking supervision Licensing Prudential regulations and requirements Methods of ongoing banking supervision Information requirements Formal powers of supervisors Cross-border banking - Principle 1: (with 6 sub-principles); - Principles 2 5; - Principles 6 15; - Principles 16 20; - Principle 21; - Principle 22; and - Principles 23 25

However, shortly after that, the experience showed that it was possible to interpret the Basel principles in several different ways. Wrong and different interpretations destroyed the consistency of their application, and also the assessment of their implementation. In order to avoid these problems a special Contact Group was established to develop a common methodology for implementation and assessment of implementation of earlier set principles. This group consisted of senior supervisors from the G-10 and non-member states, as well as the consultants from the International Monetary Fond (hereinafter: the IMF) and World Bank. In October 1999 the Committee adopted a final document entitled the Core Principles Methodology (hereinafter: Methodology) which basically elaborated in detail essential and additional criteria for implementation and assessment of compliance with the Basel Principles. Later in 2006, the Committee revised these principles and as such they were taken into consideration for upgrading

and adjustments in the Federation of BiH, particularly in the area of liquidity risk management and financial system stability. These two mentioned documents were a backbone of the achieved common and globally accepted views of the needs and forms of the needs for specific regulations of banking and financial operations which were built on historical and experiential facts as well as on assessments of expectations in the future. These views were primarily focused on banks active on a cross-border level, but with recognizable quality and desirability for their implementation within national frameworks.