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Basel Committee on Banking Supervision

Cross-Border Supervisory Cooperation under Basel II and the Revised Basel Core Principles 6th Annual International Seminar on Policy Challenges for the Financial Sector World Bank IMF/Federal Reserve Board Washington 7 June 2006 Kerstin af Jochnick. Basel Committee on Banking Supervision.

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Basel Committee on Banking Supervision

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  1. Cross-Border Supervisory Cooperation under Basel II and the Revised Basel Core Principles6th Annual International Seminar on Policy Challenges for the Financial Sector World Bank IMF/Federal Reserve BoardWashington 7 June 2006Kerstin af Jochnick

  2. Basel Committee on Banking Supervision Core Principles for Effective Banking Supervision Basel II Corporate Governance Credit risk Operational risk Liquidity risk Market risk

  3. Core Principles for Effective Banking Supervision • Principle 24 Consolidated supervision • Adequately monitoring of all aspects of the business conducted by the group world wide • Principle 25 Home-host relationship • Cross border consolidated supervision requires cooperation and information exchange between home and host

  4. Main challenges in implementing Basel II • Consistent implementation • Convergence in supervisory practices • Streamlining the supervisory process for cross-border groups • Effective consultations

  5. Convergence of supervisory practice • Supervisory Review Process (Pillar 2) • Validation of IRB and AMA Systems • External Credit Assessment Institutions • Harmonisation of reporting requirements • Supervisory disclosure

  6. Co-operation and information exchange • Supervison of cross border groups • Crisis management • Information exchange

  7. Supervisory Review Process The company The supervisor Internal Capital adequacy assessment process Supervisory review and evaluation process Dialogue Internal governance Number and assessment Conclusions Fully satisfactory Not fully satisfactory

  8. Supervisory review process – Cooperation Home/Host Consolidation supervisor Exchange of information Jointly performing or allocating tasks Agree plan. Coordination of activities Agree outcomes Preparation Exchange of information Host supervisor

  9. Supervisory cooperation Nordea • Memorandum of understanding • Supervisory plan • Supervisory risk assessment • Basel II - Ensure consistent implementation - Joint approval plan and team - Joint supervisory review

  10. Conclusion • Core principles is the umbrella and Basel II could be one important part • The home supervisor is responsible for the oversight of the implementation of Basel II • There is need for enhanced and pragmatic cooperation among supervisors. The home supervisors should lead this effort • Supervisors should avoid performing redundant and uncoordinated approval and validation work • Supervisors should communicate the respective rules of home and host country supervisors.

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