1(a) Which national bodies are the principal regulators/supervisors of financial and mixed conglomerates?

In The Netherlands, the principal regulators/supervisors of financial and mixed conglomerates are:­  The Ministry of Finance ­ legislation; Nederlandsche Bank ­ supervision of banks; Verzekeringskamer (Insurance Board) ­ supervision of insurance companies; Stichting Toezicht Effectenverkeer (Securities Board of The Netherlands) ­ supervision of securities business, stock exchange.

In Switzerland, banking activities (including securities transactions) and collective investment funds are subject to prudential supervision on a consolidated basis by the Federal Banking Commission. When the new Federal Law on securities firms and exchanges comes into force in 1996, non-bank securities brokers / dealers, who are currently only regulated on a cantonal basis, will also be subject to federal prudential supervision by the Federal Banking Commission. Insurance activities are supervised by the Federal Office for Private Insurance.

In the United States, banks and their subsidiaries are subject to consolidated supervision and examination by their primary federal banking authority (i.e. the Office of the Comptroller of the Currency in the case of a national bank; the Board of Governors of the Federal Reserve System (FRS) in the case of a state chartered bank that is a member of the FRS; and the Federal Deposit Insurance Corporation (FDIC) in the case of a state­chartered bank that is not a member of the FRS and is insured by the FDIC. State chartered banks are also subject to regulation and examination by state banking authorities. Bank holding companies and their subsidiaries are subject to consolidated supervision and examination by the Federal Reserve Board. The Securities Exchange Act of 1934 provides for the regulation of US securities markets and the broker­dealers that participate in those markets. Regardless of their corporate nature, domestic and foreign non­bank firms effecting securities transactions utilising the US jurisdictional means are required to register with the SEC as broker­dealers (US banks including most branches and agencies of foreign banks that are doing business in the United States, and are supervised and examined by US federal or state banking supervisory authorities, are excluded from the definition of "broker" or "dealer" in the Securities Exchange Act). There are no national bodies that regulate the insurance industry in the United States; instead, the industry is regulated by the insurance commissioners of the 50 states. Regulation of insurance companies within financial conglomerates is carried out by insurance commissioners according to the state in which a company is incorporated and domiciled. The insurance commissioner also has regulatory authority over companies that are authorised to do business in his / her jurisdiction.

In Canada, the principal regulator of financial institutions is the federal Office of the Superintendent of Financial Institutions (OSFI), which was formed in 1987 from the amalgamation of the former Department of Insurance and the Office of the Inspector General of Banks. The OSFI has sole responsibility for the supervision of banks. Supervisory responsibility for insurance companies and trust and loan companies is shared between the OSFI and the provincial authorities with the OSFI responsible for solvency of federally incorporated companies and foreign insurers operating in Canada on a branch basis; and the provinces responsible for matters of contract and licensing of agents, and for the solvency of provincially incorporated companies. The provinces have sole responsibility for the supervision of securities firms.

In the United Kingdom, the principal regulators / supervisors of financial and mixed conglomerates are:­  The Bank of England ­ deposit­taking institutions authorised under the Banking Act 1987; the Building Societies Commission ­ deposit-taking institutions authorised under the Building Societies Act 1986; the Department of Trade and Industry Insurance Division ­ companies authorised under the Insurance Companies Act 1982 to carry on insurance business; the Securities and Investments Board ­ a small number of institutions authorised under the Financial Services Act 1986 to carry on investment business; self­regulating organisations (SROs) recognised by the SIB ­ the vast majority of firms authorised to carry on investment business.

In France, the Minister of Economy is responsible for legislation; the Comité de la Réglementation bancaire elaborates the banking legislation; the Commission Bancaire supervises banks; the Comité des Établissements de Crédit assesses the quality of bank shareholders at the authorisation stage; the Conseil des Bourses de Valeurs and Commission des Opérations de Bourse have joint responsibility for the supervision of securities firms; and there is an insurance supervision authority.

In Italy, the Bank of Italy is the supervisory authority for credit groups (i.e. banks and securities investment firms), although the Companies and Stock Exchange Commission (CONSOB) have some powers over individual intermediaries as regards information requirements, and securities dealing. Insurance companies are supervised by the insurance supervisory authority, ISVAP.

In Germany, the Federal Banking Supervisory Office (FBSO) is responsible for the supervision of banks, and the Federal Insurance Supervisory Office (FISO) for the supervision of insurance companies.

In Belgium, the Banking and Finance Commission supervises banks and financial conglomerates as defined by the EC­directive 92/30; the Office de Contrôle des Assurances is responsible for the supervision of insurance companies; and the Caisse d'intervention des sociétés de bourse / Interventiefonds van de Beursvennootschappen (CIF) supervises broking companies.

In Luxembourg, the Luxembourg Monetary Institute supervises banks on a solo and consolidated basis, but consolidated supervision does not extend to insurance subsidiaries; the Luxembourg Monetary Institute is also in charge of the supervision of investment firms. The Commissariat aux Assurances supervises insurance companies.

In Japan, the Ministry of Finance is responsible for implementation of the Banking Law, Securities and Exchange Law and Insurance Business Law, while the Bank of Japan conducts on­site examinations at banks and securities companies for whom it maintains accounts.

In Sweden, since the 1991 merger of the former Bank Inspection Board and the Insurance Authority, the Financial Supervisory Authority has been responsible for supervision of the whole credit market.

1(b) How is the supervision put into effect?

In The Netherlands, in consultation with the Minister of Finance, the Nederlandsche Bank and the Verzekeringskamer reached an agreement in the form of a Protocol concerning the supervision of financial conglomerates. The main principle of the Protocol is that the Nederlandsche Bank supervises the banks and the Verzekeringskamer supervises the insurers which form part of financial conglomerates. The fact that conditions can be attached to the granting of a declaration of non­objection makes it possible to implement the provisions of the Protocol. The holding company is not as such subject to supervision unless it is an authorised institution. However, the Nederlandsche Bank and the Verzekeringskamer must be supplied annually (and in the near future every six months) with financial information from financial holding companies regarding their solvency position and intra­group financing. A revision to the Protocol took place in 1994 which, together with amendments to supervisory legislation, makes it possible for the supervisory authorities to subject the management of an unauthorised holding company to a fit and proper test; to assess their banking or insurance expertise; and to summon them to account for their policy. Supervisory authorities and the Minister of Finance are also able to decline requests for a declaration of non­objection in the case of conglomerates whose organisation and control structure is considered insufficiently transparent and is thus an obstruction to adequate supervision.

In Belgium, the banking and insurance supervisors have also concluded a protocol on the coordination of their respective supervisory tasks in November 1992. This does not give any of the authorities concerned a leading responsibility for the supervision of groups which include both insurance companies and credit institutions; but it does provide rules for the exchange of information and for cooperation between the two authorities.

In Switzerland, the Federal Banking Commission relies to a great extent on the examination work and audit reports of external auditors, which have to be licensed for bank audits by the Banking Commission. In fact, the whole supervisory system for banks rests on two pillars:  The Banking Commission which, as a government agency, has all the enforcement powers and supervises the bank audit firms; and the bank audit firms themselves who have to carry out the field work and provide the requisite information to the Commission. External auditors are therefore the essential supervisory tool for assessing the risks of financial conglomerates in the Swiss system. The licensed bank audit firm can require from the regulated entity all information about other (regulated or non­regulated, domestic or foreign) group companies which it needs for the consolidated audit and reporting. It has full access to the reports of internal group auditors and external auditors of group companies, communicates directly with these other auditors and is also empowered to carry out audits itself in group companies. Very often, all entities of a financial conglomerate are audited by the same audit firm or group of associated audit firms. Prudential supervision of non­bank securities broker / dealers under the new Federal Securities Law will follow the same principles. The Federal Office for Private Insurance carries out its supervisory tasks mainly by means of on­site inspections and on the basis of reports which companies have to submit each year; these reports contain detailed information on all aspects of the companies' business.

In Sweden, the Supervisory Authority relies on reports highlighting risk exposure, reports from appointed auditors and on­the­spot examinations of special functions in order to carry out its supervisory responsibilities.

In the United States, banks, bank holding companies and their subsidiaries are subject to applicable laws, regulations and standards, including consolidated capital adequacy standards; standards and approval with respect to ownership of, and acquisitions by, holding companies; standards regarding the types of transactions that are permitted or prohibited between affiliates; and standards regarding individuals who can participate on bank holding company boards of directors. The bank or bank holding company's regulator has the power to require changes in the activities and structure of a conglomerate, to limit expansion or diversification, and to remove bank officials. Registered broker­dealers are also subject to holding company risk assessment requirements and to business conduct and capital adequacy standards under the Securities Exchange Act, and to the rules of the self­regulatory organisation with respect to the business of acting as a broker­dealer in securities. In the insurance world, most states have similar laws governing such areas as capital, reserves, holding companies and reinsurance.

In the United Kingdom, the supervisory authorities use a variety of methods to put supervision into effect. The main focus of supervision applied by the supervisory authorities is on the supervision of solo group companies, but this is supplemented by various forms of consolidated / group supervision. For example, the Bank of England and the Building Societies Commission apply consolidated supervision in accordance with the relevant directives, while the Securities and Investment Board and the Self Regulating Organisations (SROs) apply a more qualitative approach. The Bank of England, the Department of Trade and Industry Insurance Division, the Securities and Investments Board and the four SROs supplement the supervision of solo regulated group companies with group-based information which is exchanged at regular college of supervisors' meetings.

In France, the supervisory authorities are able to request information from, or to conduct investigations into, parts of a conglomerate for which they are not directly responsible.

In Canada, considerable progress has been made towards coordinated supervision of financial conglomerates through the sharing of information and, in certain cases, the conducting of joint inspections of companies regulated by different jurisdictions within Canada. Groups often include players that are subject to regulation by different levels of government, making it necessary for coordination of supervision to cope with differences between political jurisdictions as well as differences in incorporating statutes.

In Germany, to the extent that parts of a group carry out banking or insurance business they are subject to the supervision of FBSO or FISO. However, neither supervisory authority has the legal power to extend its supervision to entities which are not banks or insurance companies; in consequence, the supervision of financial conglomerates is limited to regulated entities.

In Luxembourg, the Luxembourg Monetary Institute supervises the banking and investment parts of a group; consolidated supervision extends to the financial institutions of a conglomerate. The Luxembourg Monetary Institute may require group­based information from other regulated and non-regulated entities. The Commissariat aux Assurances supervises exclusively the insurance companies in a group on a solo basis.

In Japan, the Ministry of Finance has the legal power to request information from, or to conduct investigations into, subsidiaries of banks and securities companies. The Bank of Japan, as a part of its on-site examinations, is able to obtain information on subsidiaries for which the Bank is not directly responsible.

2(a) Where more than one supervisory authority is responsible for (some part of) a conglomerate, how are supervisory responsibilities allocated?

In the United Kingdom, supervisory responsibilities for a financial conglomerate are allocated by statute. Group companies within a conglomerate are subject to functional rather than institutional supervision. A banking­dominated financial conglomerate, for example, whose investment business is conducted within the banking entity itself rather than through a separately incorporated subsidiary is subject to supervision by both the Securities and Investments Board or an SRO and by the Bank of England. Insurance companies may only carry on insurance business and connected activities; an insurance company within a group will always be supervised by the Department of Trade and Industry Insurance Division. In practice, the concept of lead regulator is applied to all financial conglomerates operating in the United Kingdom with a view to maximising the effectiveness of statutory supervisory responsibilities. In general, the role of lead regulator is allocated to the supervisory authority responsible for the dominant regulated activity within a financial conglomerate.

In The Netherlands, in Luxembourg and in Belgium, supervisory responsibility is shared between the banking / securities supervisors and the insurance supervisors according to the nature of the business undertaken (see answer to question 1b in this section in respect of The Netherlands). However, Belgian law has recently introduced the concept of a lead supervisor for the supervision of financial groups on a consolidated basis whenever a credit institution belongs to a financial conglomerate with parts in several countries of the European Community.

In the United States, supervisory responsibilities are also allocated according to the nature of the activities involved. Securities activities of US banks permitted by the Glass­Steagall Act and other US laws are subject to regulation and examination by US bank regulators. However, the securities activities of separately incorporated subsidiaries and affiliates of US and foreign banks undertaking these activities, as well as those of the foreign banks themselves, are not excluded from the definition of broker and dealer under the Securities Exchange Act of 1934 and are, therefore, subject to regulation by the SEC and the self-regulatory organisations.

In Canada, supervisory responsibilities derive from the jurisdiction of incorporation of the various institutions. In France, when more than one supervisory authority is responsible for a conglomerate, supervisory responsibilities are allocated through cooperative arrangements. Typically, liaison committees have been set up, comprising the supervisors responsible for different financial activities.

In Switzerland, financial conglomerates comprising both banking (including securities) and insurance activities are a comparatively recent innovation and, in consequence, cooperation between the Federal Banking Commission and the Federal Office for Private Insurance has been rather loose and informal. This will change as linkages between the two sectors strengthen with the appointment of a lead regulator depending upon the predominant character of the financial conglomerate in question.

In Germany, there is no change to the 'natural' allocation of responsibilities in the case of financial conglomerates. The FBSO supervises the entities (and only these) which carry out banking business; the FISO supervises the entities (and only these) which carry out insurance business.

In Italy, when an insurance company forms part of a financial conglomerate either as a majority shareholder or as a subsidiary, it is subject to solo supervision by ISVAP. For conglomerates composed of an insurance company and a securities investment firm, prudential supervision is conducted on a solo basis by both ISVAP and the Bank of Italy.

2(b) Are you supervising any non-licensed holding companies in financial or mixed conglomerates?

In Switzerland, non­licensed holding companies are not supervised directly. However, regulated entities in both the banking / securities and insurance sectors are supervised in a group context, with any superordinate holding company and sister companies being included in the risk assessment. The principle that any deficiency of capital at holding company level ­ as measured by banking regulatory standards on a consolidated basis ­ must be balanced by additional capital in the main bank of the group has been confirmed in the Swiss courts, and was integrated in the Banking Ordinance in 1994.

In The Netherlands and in Canada, holding companies are not supervised unless they have a license. However, supervisory legislation (and, in The Netherlands, the Protocol between the Nederlandsche Bank and the Verzekeringskamer) make it possible for the authorities to obtain information from holding companies.

Non­licensed holding companies are often located at the head of United Kingdom­based, banking or insurance dominated financial conglomerates. In the absence of other regulatory authorities for such banking institutions, the Bank of England (the Bank) maintains a substantial dialogue with the non-licensed holding companies and has power to request information about them from the Banking Act authorised entity within the group. The Department of Trade and Industry Insurance Division has similar powers in respect of non­licensed holding companies of insurance dominated conglomerates. Moreover, the Bank includes non­licensed holding companies of UK­based banking dominated financial conglomerates in its consolidated supervision in accordance with the provisions of 2CSD.

In Sweden, the Financial Supervisory Authority also takes account of non­licensed holding companies when calculating capital ratio requirements of banks on a consolidated basis. The Authority has powers to seek information from holding companies for supervisory purposes.

In Belgium and Luxembourg, non­licensed holding companies in a financial or mixed conglomerate are not subject to solo supervision. Non­licensed holding companies are, however, taken into account in the consolidated supervision carried out by the Luxembourg Monetary Institute over banking groups. The Institute is further empowered to seek information for prudential purposes from the holding companies which are part of a mixed conglomerate.

In the United States and in Germany, while one or more of the entities controlled by a non­licensed holding company may be regulated, the non­licensed holding companies themselves are not directly subject to supervision. In Japan, non­licensed holding companies exist in only a few cases where non-financial companies own financial companies; they are not supervised directly.

In France, the Commission bancaire supervises non­licensed holding companies in financial or mixed conglomerates. Financial holding companies that do not have credit institution status are required to draw up their accounts wholly or partially in a consolidated form as concerns their banking activity, even though they are not subject to prudential regulation. The supervision of holding companies in mixed conglomerates is carried out in liaison with other relevant authorities.

In Italy, holding companies of credit groups are supervised by the Bank of Italy on both a solo and a consolidated basis. On the insurance side, however, non­licensed holding companies controlling one or more insurance companies are not supervised.

2(c) If not, who is supervising such non-licensed holding companies?

In most countries, non-licensed holding companies are not directly supervised. In The Netherlands, however, the Protocol provides for the supervisors to be supplied with information about non­licensed holding companies (see answer to question 1b in this section).