This Handbook explores some basic principles of banking supervision. First of all, it addresses the general question of why banks need to be supervised, and sets out the basic aims of supervision. It then examines the nature of banking risks. Next, the key areas of prudential supervision are discussed - namely, capital adequacy, liquidity, asset quality, risk concentration, management, and systems and controls. The need for an effective infrastructure for supervision, not least in respect of the legal and accounting environment, is noted. And the relative contributions of off-site and on-site supervision are briefly discussed. The Handbook does not seek to prescribe what any country should do, or to promote particular national practices (which may be mentioned by way of illustration). Rather, it seeks to introduce the nature and concepts of supervision to those for whom the subject may be comparatively unfamiliar. This handbook is also available in Russian and Spanish.