The BIS outlines its concerns in a paper prepared by the Electronic Banking Group (EBG) of the Basel Committee on Banking Supervision. The bank is publishing the paper in anticipation of an explosion of activity in the provision of online banking services across borders.

It stresses the need for banks to integrate cross-border e-banking risks into the bank's overall risk management framework. The paper contains refinements to existing risk management principles concerning the responsibility of banks to conduct appropriate due diligence and risk assessment, provide adequate disclosures, and establish an ongoing risk management oversight process prior to engaging in cross-border e-banking.

The document states: "Although these risks are not new, cross-border e-banking can increase certain banking risks such as strategic risk, reputational risk and operational risk and expose a bank to country risk. Further, given the continued evolution of developments affecting issues of legal jurisdiction and choice of law considerations with respect to cross-border e-commerce, banks that engage in cross-border e-banking may face increased legal risk.

The paper also draws attention to the need for effective home country supervision of cross-border e-banking activities as well as continued international cooperation between banking supervisors regarding such activities

"This is essential to promote safe and sound cross-border e-banking without creating undue regulatory burden or impediments to banks' use of the Internet delivery channel to meet customer needs," states the paper.

The BIS is inviting comments on issues outlined in the paper which should be submitted to relevant national supervisory authorities and central banks by the end of the year.