The Australian Prudential Regulation Authority (APRA) is seeking feedback on two reports that have been jointly released by the Basel Committee on Banking Supervision (Basel Committee), the International Association of Insurance Supervisors (IAIS), and the International Organization of Securities Commissions (IOSCO). The reports are the product of work by the Joint Forum, which draws on regulators from the three parent bodies.

The first report covers cross-sectoral comparisons of risk management practices and regulatory capital. The second deals with similarities and differences in the core principles for effective supervision, developed by the three parent committees for their respective sectors.

The documents are available from the websites of the BIS (www.bis.org), IAIS (www.iaisweb.org) and IOSCO (www.iosco.org).

Risk management practices and regulatory capital

APRA actively participated in the work of the Risk management practices and regulatory capital report. A Joint Forum working group of supervisors from across the banking, insurance and securities sectors was asked to examine risk management and capital regulation to gain a better understanding of current industry practices in all three sectors. The working group has drawn on interviews with market participants, rating agencies and analysts, as well as on its own regulatory experience.

The main sections of the report focus on: differences in core business activities; similarities and differences in risk management tools; approaches to capital regulation in the three sectors; and cross-sectoral risk transfers and investments.

Core principles

The Core principles report was developed by a working group that was asked to compare the core principles issued by the Basel Committee, the IAIS and IOSCO by identifying common supervisory principles and practices, and understanding differences where they arise.

While each sector worked independently in drafting its core principles, there was a great deal of similarity in the approaches taken; in all cases, the process involved extensive and broad consultations within the sector. While the group found a number of differences between the core principles of the various sectors, there was also was much common ground among them. Importantly, there was no evidence of underlying conflict or contradiction between the three sets of core principles at the highest levels.

The deadline for industry feedback is 29 March 2002. Please send comments to:

Wayne Byres
APRA
GPO Box 9836
Sydney NSW 2001

The Joint Forum was established in early 1996 under the aegis of the Basel Committee, IOSCO and the IAIS, to take forward the work of a predecessor group, the Tripartite Group, in examining supervisory issues relating to financial conglomerates. The Joint Forum comprises an equal number of senior bank, insurance and securities supervisors representing each supervisory constituency. Thirteen countries are represented in the Joint Forum: Australia, Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Spain, Sweden, Switzerland, the United Kingdom and the United States. The EU Commission attends in an observer capacity. The Chairman of the Joint Forum is Mr Jarl Symreng, Head of the Insurance and Mutual Funds Division of Finansinspektionen, Sweden.

The Joint Forum of banking, securities and insurance supervisors has been working to enhance mutual understanding of issues related to the supervision of firms operating in each sector. These efforts reflect the development of financial conglomerates, the increasing globalisation of financial markets and the development of new financial instruments. The growing emergence of financial conglomerates and the blurring of distinctions between the activities of firms in each financial sector have heightened the need for cooperative efforts to improve the effectiveness of supervisory methods and approaches. The Basel Committee, IOSCO and the IAIS consider the coming together of representatives of each supervisory constituency in the Joint Forum to be of great value in building the cooperative spirit necessary to address the supervisory challenges arising from financial conglomerates and common to all three financial sectors.

For further information:

Craig Thorburn General Manager Diversified Institutions Division 02 9210 3381

Wayne Byres General Manager Policy, Research and Consulting 02 9210 3146