For immediate release

As part of its ongoing work to improve risk management standards in banks, the Basle Committee on Banking Supervision (Basle Committee) issued a paper today entitled Framework for Internal Control Systems of Banking Organisations. In this paper, the Basle Committee presents the first internationally accepted framework for supervisors to use in evaluating the effectiveness of the internal controls over all on- and off-balance-sheet activities of banking organizations. The paper describes elements that are essential to a sound internal control system, recommends principles that supervisors can apply in evaluating such systems, and discusses the role of bank supervisors and external auditors in this assessment process. It also comments on the lessons learned from recent internal control failures. The internal control framework described in the paper is designed for international banking organizations. The guidance is broadly consistent with the Committee of Sponsoring Organizations of the Treadway Commission (COSO) document, Internal Control - Integrated Framework, that is extensively used by larger U.S. banks. The paper is being distributed to supervisory authorities around the world, to banks and to other interested parties. The paper was previously issued as a proposal for public comment in January 1998. Prior to this proposal, the Basle Committee's guidance had discussed internal controls in specific areas of bank activities, such as interest rate risk and trading and derivatives activities. The Basle Committee's press release and the paper can be obtained from the Internet (http://www.bis.org) or from the Basle Committee Secretariat at the Bank of International Settlements.

1998 Banking and consumer regulatory policy