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Peter D A Queeley Manager Risk & Compliance

Peter D A Queeley Manager Risk & Compliance. International Financial Supervisory Harmonization Initiatives Cont’d. The IMF and World Bank as part of its Financial Sector Assessment Program (FSAP) utilizes the standards and codes promulgated by international standard setting bodies such as:

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Peter D A Queeley Manager Risk & Compliance

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  1. Peter D A Queeley Manager Risk & Compliance

  2. International Financial Supervisory Harmonization Initiatives Cont’d • The IMF and World Bank as part of its Financial Sector Assessment Program (FSAP) utilizes the standards and codes promulgated by international standard setting bodies such as: • The Basel Committee on Banking Supervision • The International Association of Insurance Supervisors (IAIS) • The International Organization of Securities Commissions (IOSCO) • The Financial Action Task Force (FATF)

  3. International Financial Supervisory Harmonization Initiatives Cont’d • Basel Committee on Banking Supervision • Provides a forum for regular cooperation on banking supervisory matters. • Its objective is to enhance understanding of key supervisory issues and improve the quality of banking supervision worldwide. • It seeks to do so by exchanging information on national supervisory issues, approaches and techniques, with a view to promoting common understanding. • the Committee is best known for its international standards on capital adequacy

  4. International Financial Harmonization Initiatives • Basel Core Principles on Banking Supervision; • The Core Principles have been used by countries as a benchmark for assessing the quality of their supervisory systems and for identifying future work to be done to achieve a baseline level of sound supervisory practices. • Experience has shown that self-assessments of countries' compliance with the Core Principles have proven helpful for the authorities, in particular in identifying regulatory and supervisory shortcomings and setting priorities for addressing them. • The Core Principles have also been used by the IMF and the World Bank in the context of the Financial Sector Assessment Program to assess countries' banking supervision systems and practices.

  5. International Financial Supervisory Harmonization Initiatives Cont’d • The financial landscape has changed, Banks, insurers, and securities firms have begun to offer similar or even identical products, or have common ownership. • With the creation of new financial instruments and services offered by various financial institutions, countries have found that boundaries between the different types of financial institutions such as banking, securities, and insurance have blurred. • As the role of financial conglomerates continues to increase concerns have become more apparent over the effectiveness of multiple regulatory and supervisory agencies

  6. International Financial Supervisory Harmonization Initiatives Cont’d • Regulatory innovation is necessary to keep pace with financial innovation. Policymakers should be open to changes, including unification, and adopt reforms needed in their circumstances. • Central banks that have historically been involved in financial supervision often resist reforms that would unify supervisory powers in an agency other than the bank. • A number of governments have been considering consolidating supervisory functions in an effort to both achieve efficiencies and to improve the quality of the supervision of financial conglomerates. • In addition, in response to the assessments under international standards and codes, supervisory bodies have been working to improve their performance and this has led some of them to review their placement within the government.

  7. Unified Financial Supervisory Organization • In June 1998, the Bank of England turned over banking supervision responsibility to the newly established Financial Services Authority (FSA), charged with the supervision of all segments of the financial system. • That transfer marked a significant shift in thinking about financial sector supervision. • Indeed, it was the first time that a large industrialized country and major international financial centre – decided to assign the task of supervising the entire financial system to a single authority other than the central bank.

  8. Unified Financial Supervisory Organization Cont’d • Since that landmark date, the number of unified supervisory agencies has grown rapidly worldwide, particularly in Europe. • In addition to the UK, three “old” EU members – Austria (2002), Belgium (2004), and Germany (2002) – have assigned the task of supervising the entire financial system to a single authority other than the central bank. • Switzerland moved to the same model in 2009. They have been accompanied by five accession countries” – Estonia (1999), Latvia (1998), Malta (2002), Hungary (2000) and Poland (2006) • The reform wave caught on outside Europe as well. Unified agencies have been established in Kazakhstan, Korea, Japan, Nicaragua, Rwanda, and a number of other countries.

  9. Caricom Level Initiatives • The global financial crisis has given rise to a push to harmonize the Caribbean capital market, due to both the rise in mergers and acquisitions and the need for a harmonized regional capital market to successfully implement the CSME. • Collapse of the CL Financial Group including British American Insurance. • Collapse of Stanford Financial Group Stanford Financial Group • Collapse of Stanford financial Group has become very contentious and controversial for CARICOM when seven investors brought a class action suit against the government of Antigua and Barbuda, charging it with racketeering and

  10. Caricom Level Initiatives • To achieve success, the emerging Caribbean financial regulatory and supervisory regimes must mirror closely the international regulatory and supervisory regime. • The supervisory and regulatory regime must be transparent and encourage the participation of nongovernmental actors. • The regime must be proactive in the generation of knowledge and accountability of outcomes. • The financial regulatory and supervisory regime must be such that it encourages and facilitates investment into the financial services industry in the region.

  11. Caricom Level Initiatives • Heads of Government have cited the need for the following: • The need for closer collaboration among the supervisory authorities in Caribbean jurisdictions where information can be shared regularly to address cross-border financial issues. • Establishment of a College of Regulators. To a large extent this initiative seeks to emulate the recommendations and actions of the G-20, such as the decision to establish a College of Regulations. • Continued improvement in standards for disclosure, transparency, and corporate governance for both public and private companies is required for effective surveillance, regulation, and supervision. • Early warning systems, stress testing, and the publication of financial soundness indicators are critical for monitoring at the national and regional levels to improve detection and assessment of threats to regional financial stability.

  12. Caricom Level Initiatives • Heads of Government have endorsed the following regional financial regulatory and supervisory organizations: • The Committee of Central Bank Governors • The Caribbean Association of Insurance Regulators • The Caribbean Group of Securities Regulators • The CARICOM Competition Commission • Caribbean Financial Action Task Force

  13. Caricom Level Initiatives • Wherever possible these regional regulatory and supervisory organizations must endorse and adopt the standards and codes promulgated by international standard setting bodies. • It is expected regulatory and supervisory organizations will take into consideration regional and local realities. • The one size fit all financial regulatory and supervisory approach will not work well when applied in small open economies such as those of the Caribbean countries

  14. Caricom Level Initiatives • The heads of government have also endorsed the implementation of the CARICOM Financial Services Agreement (CFSA): • In creating the CSME, the CFSA is expected to play a critical role by assisting in the formation of a harmonized financial services market in which all economic actors will be expected to abide by similar rules, standards, and conditions across the community. • CFSA is expected to complement the removal of restrictions on the movement of people, services, and capital, which is also required to fully establish the region's single economic space.

  15. Caricom Countries Financial Supervisory Structure • Bank of Jamaica supervises and regulates deposit-taking institutions in Jamaica, that is, commercial banks, merchant banks and building societies and remittance companies. • In Jamaica there exist the FSA which amongst other things has the responsibility to supervise the insurance sector, the securities business sector and pension funds. • In Barbados the Central Bank of Barbados is responsible for regulating and supervising commercial banks, merchant banks, trust and finance companies and international (offshore) banks licensed in Barbados.

  16. Caricom Countries Financial Supervisory Structure Cont’d • In Trinidad and Tobago the Central Bank is responsible for the supervision of licensed financial institutions and registered insurance companies and pension plans. • Financial Institutions in Trinidad and Tobago include Confirming House or Acceptance House, Finance House or Finance Company, Leasing Corporation, Merchant Bank, Mortgage Institution, Trust Company, Unit Trust, Credit card business, other financial Services • The Central Bank of Guyana is also responsible for the licensing and supervision banking and other deposit taking business, dealers in foreign currency ie cambios, money remittance companies, and insurance companies.

  17. Caricom Countries Financial Supervisory Structure Cont’d • OECS Level Initiative, the creation of a Unified Financial Supervisory Organization: • At the level of the OECS heads of Government a decision has been taken that each country will create a single financial regulatory and supervisory body for all financial services companies except commercial banks. • This approach has been endorsed by the regional central bank the ECCB. • Commercial banks were omitted for the conduct of monetary policy purposes. • The approach by the OECS Governments represents a positive step forward as it relates to the creation of a unified financial supervisory agencies within the region

  18. Conclusion • On July 5, 2009, the heads of government of the Caribbean Community (CARICOM) at its 30th meeting in Liliendaal issued a declaration as it relates to the following: • Regional financial regulation and supervision must illustrates an initiative to harmonize the financial regulatory regime while strengthening parliamentary oversight and cooperation with international financial regulatory regimes • To achieve success, the emerging CARICOM financial regulatory regime will need, as must the counterpart international regulatory regime, to build transparency, the participation of nongovernmental actors, and the proactive generation of knowledge and accountability of outcomes. • The cooperation must also lead to regulatory competition that is especially beneficial for consumers.

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