02.14 The revised Core Principles reflect regulatory and supervisory developments, structural changes in banking, and lessons learnt in FSAP assessments since the last revision in 2012. The current review has been informed by several thematic topics: (i) financial risks; (ii) operational resilience; (iii) systemic risk and macroprudential supervision; (iv) new risks, such as climate-related financial risks and the digitalisation of finance; (v) non-bank financial intermediation; and (vi) risk management practices.

02.15 The post-Great Financial Crisis (GFC) period has seen banks continue to build their resilience to financial risks, underpinned by stronger regulatory and supervisory frameworks, including the Basel III standards. The Core Principles have been strengthened to reflect key elements of many of the post-GFC reforms introduced by the Committee. In particular, the importance of a non-risk-based measure to complement risk-based approaches in constraining leverage in banks and the banking system (eg a leverage ratio); enhancements to credit risk management practices; the introduction of expected credit loss approaches to provisioning; and more stringent requirements for managing large exposures and related party transactions. More recent crises, such as the Covid-19 pandemic and episodes of bank distress, have reinforced the importance of bank and banking system resilience to a range of different shocks, as well as the need for effective supervision.