1. To provide to supervisors involved in the oversight of regulated financial institutions residing in financial conglomerates guiding principles with respect to supervisory information sharing, to build on and enhance existing information sharing arrangements, particularly cross sectorally.

Background

2. Technological innovation, the liberalisation of national financial markets and the removal of legal and trade barriers between countries have encouraged the development of diversified financial conglomerates with complex management and corporate structures. In addition, many conglomerates are organised along global business lines and still more manage some or all of their major risks across the various entities within the group, in a manner that cuts across legal entity lines.

3. The rapid evolution of such diversified financial conglomerates which offer a comprehensive range of financial services, including banking, securities and insurance services, on a global basis presents significant challenges to both the management of these firms and the supervisors with responsibility for the regulated entities within the conglomerate. The broad span of activities and locations alone create the need to understand the relationships among the legal entities within the structure and the potential for adverse developments in one part of the conglomerate to affect the operation of other parts.

4. The fields of responsibilities of supervisory authorities, by contrast, are determined by national legislation. They vary significantly in terms of their mandates and approaches.

5. As a result, the supervisory structure often does not align with the organisation of the business and risk management structure of the conglomerate. This has implications for the effective oversight of diversified financial conglomerates, underscores the importance of communication between supervisors and further requires the development of cooperative links between them.

6. Information exchanges intra sector are facilitated through protocols entered into at different times. For example, the Basle Committee's Minimum Standards for the Supervision of International Banking Groups and their Cross-border Establishments (July 1992) as supplemented by a Report on the Supervision of Cross-border Banking (October 1996) established a framework for the exchange of information between supervisors. Likewise, IOSCO's Principles for Memoranda of Understanding (1991) established a framework for facilitating comprehensive information sharing between securities supervisors and has encouraged the development of numerous such arrangements. The IAIS "Insurance Concordat" - Principles applicable to the Supervision of International Insurers and Insurance Groups and their Cross-border Establishments provides the basis for intra-sectoral cooperation. Also, numerous bilateral arrangements exist amongst supervisors providing for the flow of general and specific supervisory information, in some cases in respect of individual financial conglomerates.

7. These protocols and arrangements in large part determine a common set of principles with respect to information sharing among supervisors. This paper adapts and summarises basic principles drawn from those protocols and arrangements and applies them to communication among the broad community of supervisors of financial conglomerates, both within and between sectors. It should be noted that such principles can only be fully effective when virtually all legal and procedural impediments to appropriate supervisory information sharing have been removed. 8. In this regard, in May 1998 the G-7 Finance Ministers released the Ten Key Principles on Information Sharing which setout, among other things, a policy framework for legislative regimes facilitating information sharing among supervisors. The Joint Forum welcomes the Ten Key Principles and notes that:

• they complement the principles set out in this paper; and
• their implementation is substantially a matter for relevant legislative authorities.

The Ten Key Principles were published in the report entitled Financial Stability - Supervision of Global Financial Institutions and are set out in full in Annex 1 to this paper.