THE IMPORTANCE OF BANKING SUPERVISION IN ENSURING FINANCIAL STABILITY

Financial stability plays a vital role in terms of the financial system and the economy as a whole. Analysis and management of risks in the banking sector in order to achieve the financial stability of the whole banking system requires the use of established methods in modern management of risk. The financial crisis has demonstrated certain limits in terms of efficient management of risk. In this respect supervisory authorities have developed a number of methods and techniques to detect, monitor and amount of risk. In the present context, to enhance the stability of the banking system and prevent systemic risk, it is proposed to revise the Basel II Agreement. It was necessary to review the existing prudential regulations defining, embodied in Basel III. This new agreement brings more clarity in the financial and banking sector, addresses a wider range of risks, providing a better regulator.