The Supervision of Cross-Border Banking

October 1996

This document reproduces a report prepared by a working group consisting of members of the Basle Committee on Banking Supervision and the Offshore Group of Banking Supervisors and endorsed by both Committees. It presents a number of proposals for overcoming the impediments experienced by banking supervisors in conducting effective supervision of the cross-border operations of international banks. The working group was established in order to consider a number of problems which had been experienced in the implementation of the Basle Committee's report "Minimum Standards for the Supervision of International Banking Groups and their Cross-border Establishments" (July 1992) and to suggest practical solutions.

In June 1996, the report was discussed at the Ninth International Conference of Banking Supervisors in Stockholm attended by supervisors from one hundred and forty countries. Conference participants, in their capacity as bank supervisors, endorsed the principles set out in the report and undertook to work towards their implementation in national centres. It is intended that a survey should be conducted in advance of the next ICBS in 1998 to monitor the progress made in overcoming obstacles to effective consolidated supervision.

The report consists of two principal sections. A first section examines the means by which home-country supervisors can obtain the information they need to exercise effective consolidated supervision of an international banking group. Many of the twenty-nine recommendations address the relatively few, but nonetheless significant, impediments to effective consolidated supervision that can arise and suggest ways in which these may be overcome. The paper recommends a set of conditions designed to ensure that information obtained by bank supervisors from their supervisory colleagues in other countries remains confidential and standard procedures for the conduct of cross-border inspections by home-country supervisors. A second section of the paper addresses the need to ensure that all cross-border banking operations are subject to effective home and host country supervision.