The banking crisis of 2023: new challenges in the banking supervision and regulation

Abstract

The crisis of some banking entities in March 2023 reminds us of the importance of demanding regulation and supervision and, above all, of truly effective corporate governance and risk management. The events observed have served as a reminder of how quickly banking crises can happen. This article analyzes the roots of the problems that, in a context of uncertainty and rapid contagion effects, affected entities that had significant weaknesses in their business model, governance and risk management, contributing to the literature on banking supervision and regulation. The article also reviews the main implications for the banking sector and for authorities internationally. Thus, these facts remind us, once again, that banking activity must be based on business models that are sustainable over time and on appropriate risk management. Furthermore, the importance of the supervisory activity done with the appropriate tools to guarantee its early and effective reaction is once again highlighted. Finally, although current regulation has helped curb the systemic reach of crises by increasing the resilience of the banking sector, thus once again reinforcing the need to implement the Basel III framework, there are some areas where it is appropriate to continue analyzing the functioning of the prudential regulatory framework.