F. International Regulation

• Author: M.H. Ogilvie
• Profession: LSM, B.A., LL.B., M.A., D.Phil., D.D., F.R.S.C. Of the Bars of Ontario and Nova Scotia Chancellor's Professor and Professor of Law, Carleton University
• Pages: 34-36

Page 34

As a trading nation, Canada’s financial system cannot be isolated from the global economy but must present a transparent, static, and secure financial sector if the economy and the country are to flourish. Therefore, although Parliament enjoys domestic sovereign authority over banks and banking, cooperation with other countries in relation to banking is necessary, and the main international body that coordinates financial institutions policy is the Bank for International Settlements (BIS),⁴⁴based in Basel, Switzerland.

The BIS was originally founded in 1930 by several central banks to deal with German World War I reparations, but because of unsavoury connections with the Nazi regime in Germany, it remained relatively obscure until the third quarter of the twentieth century, effecting payments between central banks and arranging periodic meetings of central bankers. The BIS is a private bank incorporated in Switzerland

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and is owned by various central banks, including the Bank of Canada. Its charter limits it to taking deposits from its member central banks and permits it to make loans only to its members. It is a central bank for central banks, and in addition to effecting payments between central banks, serves as a confidential forum for discussing monetary and regulatory policy on an international basis.

In 1975 the Basle Committee on Banking Supervision was established at the BIS, and it consists of the banking regulators of major financial countries, including Canada. The Committee’s specific mandate is to address the reduction of risk posed to the global financial system by bank failures. It operates by encouraging dialogue and cooperation and suggesting agreed capital adequacy standards for domestic banks. While its suggestions have no formal legal status or authority, its recommendations ("soft law") are followed by banking regulators internationally. The Basle Committee has drawn up sets of principles from time to time, such as the 1975 Concordat,⁴⁵the 1983 Concordat⁴⁶together with the 1992 supplement to deal with the collapse of BCCI, the 1988 Capital Accord⁴⁷amended in 1996, and the 2001 Core Principles.⁴⁸

All of these were concerned with various aspects of risk and solvency. As part of its regulation of banks and banking in Canada, the federal government applies the principles proposed from time to time by the Basle Committee.

Several other international bodies are often associated with the financial sector, so...