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The Supervision of Financial Conglomerates


174. In this paper, the Tripartite Group has endeavoured to provide international bodies in the fields of bank, insurance and securities supervision with a progress report on the trilateral discussions that have taken place over the past two years. As will have been evident, with the benefit of the work previously carried out by individual groups in this field, the Tripartite Group has been able to cover a significant amount of ground.

175. A range of problems which financial conglomerates pose for supervisors has been identified, and ways in which these problems might be alleviated have been discussed in some depth. Underpinning the Tripartite Group's response to many of these issues is a clear­cut need for more intensive cooperation between supervisors in the fields of bank, insurance and securities supervision. In parts of this paper, the Group has endeavoured to define some of the elements of this "more intensive cooperation", and to indicate how such cooperation might work in practice although it is recognised that, in some countries, there may be certain impediments to information exchange which need to be removed first.

176. Considerable progress has been made in identifying broad areas of agreement between supervisors in the various disciplines. Firstly, the group is unanimous in its view that there needs to be a group­wide perspective to the supervision of financial conglomerates if such supervision is to be effective. However, the Tripartite Group is also firmly of the view that group-wide supervision of financial conglomerates should not replace the solo supervision of individual group entities. It is essential that solo supervision continues to take place and that relevant prudential information relating to individual entities is fed into a quite separate group­wide risk assessment. The appointment of a lead regulator or convenor to facilitate this process and to undertake the necessary prudential assessment from a group­wide perspective is strongly recommended.

177. Despite difficulties associated with the different definitions of capital, different types of risk and different capital requirements being applied across the regulatory spectrum, considerable progress has also been made in identifying what the Tripartite Group regards as acceptable techniques for the assessment of capital adequacy in a financial conglomerate. It is envisaged that the lead regulator or convenor would undertake this assessment on the basis of information received either from other supervisors and/or directly from the financial conglomerate itself. In other areas, too (e.g. large exposures, intra­group exposures etc.) methods of dealing with the special problems posed by financial conglomerates, and solutions which have the broad support of all members of the Tripartite Group, have been identified.

178. In a group where members are participating in an individual capacity, this is probably as much as one can expect to achieve. Without a mandate from their respective supervisory organisations, individuals cannot be expected to commit themselves to implementation of agreed recommendations, nor can they be expected to negotiate solutions, with which they might not be entirely in agreement, but which they might be prepared to support in order to reach a mutually acceptable outcome for supervisors in the banking, securities and insurance fields. The Tripartite Group hopes that its work over the past two years, which is encapsulated in this paper, will provide very firm foundations for any further work that may be undertaken in this regard.


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