Bis’s Supervisory Framework of Financial Conglomerates: Outlook of Regulators in the 21st Century

BIS’s Supervisory Framework of Financial Conglomerates: Outlook of Regulators in The 21st Century

Vishal Verma, BSc (Hons)

Date: 21st March 2011

Module Title: Financial Services Regulation and Compliance, BKM021

Module Lecturer: Dr Mohamed Nurullah

Introduction

Establishment of BIS

The Bank for International Settlements was established in 1930. It is the world's oldest international financial institution and remains the principal centre for international central bank cooperation (BIS Website). The BIS is a global centre for financial and economic interests. As such, it has been a principal architect in the development of the global financial market. Given the dynamic nature of social, political and economic situations around the world, the BIS can be seen as a stabilizing force, encouraging financial stability and international prosperity in the face of global change (Investopedia Website).

BIS’s Supervisory Framework for Financial Conglomerates

The BIS’s fundamental objectives are to ensure correct and efficient management of the regulatory and supervisory systems which govern financial conglomerates, whose large scale activities cross national borders and sectoral boundaries (Joint Forum on Financial Conglomerates, 1999). These financial conglomerates (consisting of two or more different financial services sectors, mainly from banking, insurance, securities and investment) must be regulated and supervised between each sector of the conglomerate as well as across all sectors of the conglomerate and its activities. In order to achieve this aim, the Joint Forum on Financial Conglomerates (established in 1996 by the Basel Committee, IOSCO and IAIS which is comprised of an equal number of senior bank, insurance and securities supervisors representing each supervisory constituency) has created a mandate framework for the supervision and regulation of financial conglomerates. They have sectioned its framework into four distinct groups which...