Transcript AOB ABIT ABIB

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:
– 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)
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
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.
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
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.
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.
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.
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
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.
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 G20, 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.
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
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
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.
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.
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.
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
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.