The global financial crises highlighted the glaring shortcomings of the supervision of financial conglomerates with their myriad of regulated and unregulated units that span national and industry boundaries. Deciding which supervisory body was responsible for which unit was not always clear.
In response to the crises, the Joint Forum - set up in 1996 to include banking, insurance and securities regulators - published an initial framework in 1999 for how to avoid such supervisory gaps.
These principles have now been updated to reflect progress made by the Joint Forum's parent committees: the Basel Committee on Banking Supervision, the International Organization of Securities Commissions (IOSCO) and the International Association of Insurance Supervisors (IAIS).
"The 2012 Principles reaffirm the importance of supervisory cooperation, coordination and information sharing, clarifying the importance of identifying a Group-level Supervisor whose responsibility is to focus on group-level supervision and the facilitation of coordination between relevant supervisors," the report said.
The principles are aimed at giving national policy makers and supervisors a set of internationally agreed standards that ensure effective supervision of financial conglomerates.
Among the updated principles is ensuring that supervisors have the necessary legal power and authority to perform a group-wide supervision of financial conglomerates and ensure that these companies have robust capital, liquidity and risk management frameworks.
"Supervisors should ensure that financial conglomerates develop and follow appropriate policies to manage capital on a group-wide basis sufficient to help ensure the entity remains able to withstand a period of adverse conditions,"according to the Principles.
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