Regulators beef up oversight of cross-border groups

LONDON, Sept 24 Mon Sep 24, 2012 6:46pm IST

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LONDON, Sept 24 (Reuters) - Citigroup, ING and other cross-border financial groups will have to assess risks across their different operations under tougher supervisory guidelines published by global regulators on Monday, aiming to plug gaps highlighted by the financial crisis.

Such firms, known as financial conglomerates because they typically span borders and cover banking and insurance, can be harder for supervisors to get a clear snapshot of, in terms of their risks and capital requirements.

Three regulatory bodies on Monday published revised principles that will require more transparency by conglomerates, such as giving supervisors more information about any off-balance sheet vehicles.

The Basel Committee on Banking Supervision, the International Organisation of Securities Commissions and the International Association of Insurance Supervisors pledged to work more closely together to avoid supervisory blind spots.

"The global adoption of these supervisory principles and their application in proportion to the risks posed will help strengthen the global financial system," said Therese Vaughan, who chairs the joint forum which represents the three bodies.

"At a minimum, the principles should be applied to large internationally active financial conglomerates," said Vaughan, who is also chief executive of the U.S. National Association of Insurance Commissioners.

The revised principles put a stronger emphasis on supervisors and conglomerates identifying risks, performing group-wide stress tests and bringing opaque off-balance sheet activities within the scope of supervision.

A lead group-wide supervisor should also be clearly identified to make sure the institution's capital buffers are adequate.

The bulk of the world's banking, securities and insurance markets belong to the three regulatory bodies whose membership is conditional on applying agreed principles.

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