Improving Banking Supervisory Mechanisms
In the OIC Member Countries
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 Credit risk
 Problem assets, provisions and reserves
 Concentration risk and large exposure limits
 Transactions with related parties
 Country and transfer risks
 Market risks
 Interest rate risk in the banking book
 Liquidity risk
 Operational risk
 Internal control and audit
 Financial reporting and external audit
 Disclosure and transparency
 Abuse of financial services
The set of Core Principles constitutes a universal set of requirements to achieve an effective
system of banking sector supervision which relies on the ability of supervisory authorities to
implement, monitor and enforce supervisory policies under regular and stressed financial
situations. The first category of principles involves necessary conditions for an effective
supervision with a particular focus on the roles of the supervisory authority. The second
category is mostly related to the management of the risk factors for the banking system.
4.2 Analyzing the Supervisory Mechanism for the Selected OIC Member States
Despite the importance of banking regulation and supervision, a comprehensive assessment of
these principles for a large set of countries, which allows for an in-depth comparison of
supervisory practices, is not readily available. The best source of information in this regard, is
the Bank Regulation and Supervision Survey conducted by the World Bank. In this section, the
evolution of the regulation and supervision structure in selected OIC member countries is
investigated using survey data constructed by the World Bank14, which is available in four
waves, in 2000, 2003, 2007 and 2011 and include a wide range of questions on banks’
regulatory and supervisory practices. Questions exhibit different characteristics in each survey
and constructing coherent measures is a difficult task. Barth, Caprio and Levine (2013) design
indices in order to obtain coherent and comprehensive comparison for 180 countries and
provide a parsimonious way to compare individual countries along all dimensions of the
surveys. These indices are related to the set of Core Principles of the Basel Committee and
suitable to assess compliance in countries with these principles. Questions cover entry into
commercial banking, ownership of bank restrictions, capital standards, allowable activities for
banks, external auditing requirements, governance of banks, liquidity and diversification
requirements, deposit protection schemes, asset classification and provisioning practices,
accounting and information disclosure requirements, supervisory powers associated for
dealing with banks in financial duress, and the structure, mandate, staffing, and procedures of
supervisory agencies14F15. In this report, we focus on the evolution of banking regulation and
supervision in selected OIC countries, namely Algeria, Malaysia, Indonesia, Saudi Arabia,
Turkey, Nigeria, Pakistan, Kazakhstan and United Arab Emirates. We also provide a
comparison to the set of all OIC countries as a whole and as divided into four World Bank
14See Barth, Caprio and Levine (2013) for an extensive analysis covering 180 countries and the construction of index
measures for the survey questions.
15Details can be found at