BIS: Consultative paper on "Principles for the supervision of financial conglomerates" released by the Joint Forum

19 December 2011

The proposed principles provide national authorities, standard-setters and supervisors with a set of internationally-agreed principles that support consistent and effective supervision of financial conglomerates, and in particular those financial conglomerates that are active across borders.

Mr Tony D'Aloisio, Chairman of the Joint Forum, stated that "these principles should, over time, help strengthen the global financial system through more effective and consistent oversight and supervision of financial conglomerates notably including risks arising from unregulated financial activities and entities".

The principles issued address complexities and gaps resulting from cross-sectoral activities with a scope of application based on a revised and broader definition of a financial conglomerate.

The proposed principles are organised into five sections and expand on and supplement the 1999 Principles in a number of ways:

  1. Supervisory powers and authority - The principles are directed to both policymakers and supervisors, highlighting the need for a clear legal framework that provides supervisors with the necessary powers, authority and resources to perform, with independence and in coordination with other supervisors, comprehensive group-wide supervision.
  2. Supervisory responsibility - The principles reaffirm the importance of supervisory cooperation, coordination and information exchange.
  3. Corporate governance - The principles reaffirm the importance of fit and proper principles and also provide, through a series of new principles, guidance for supervisors intended to ensure the existence of a robust corporate governance framework for financial conglomerates.
  4. Capital adequacy and liquidity - The principles highlight the role of supervisors in assessing capital adequacy on a group basis, taking into account unregulated entities and activities and the risks they pose to regulated entities.
  5. Risk management - The principles set out the need for a financial conglomerate to have a comprehensive risk management framework to manage and report group-wide risk concentrations and intra-group transactions and exposures.

Comments on this consultative report should be submitted by Friday 16 March, 2012.

Press release


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