Core principles - cross-sectoral comparison

In March 2000, the Joint Forum set up a working group to compare the core principles issued by the Basel Committee, the IAIS and IOSCO by identifying common principles and understanding differences where they arise. This report is based on the findings of the Group.

The Joint Forum hopes that this analysis will help those assessing jurisdictions against the core principles gain a familiarity with, and understanding of, the core principles of all sectors and thus become more effective in their work. 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.

In both structure and content, the core principles reflect characteristics of the respective sector and the nature of the supervised financial institutions, intermediaries and markets. The Joint Forum has sought to be comprehensive and balanced, drawing on intrinsic characteristics where necessary to explain differences. It has emphatically avoided making any judgments as to whether the core principles are right or wrong, recognising that each is designed to meet sector-specific needs.

Conclusions and observations made:

• Each set of core principles provides an overview of the key elements of the supervisory regime in that sector at the time they were written. However, the pace of developments in the financial sector since then would require consideration of the need to keep the core principles updated. The impact of this varies between the sectors according to the structure of the relevant documents.
• There is no evidence of underlying conflict or contradiction between the three sets of core principles at the highest levels.
• There are numerous areas of common ground (eg authorisation, organisation of supervision, intervention). However, it was established that in some cases there are significant differences in the application of similar principles (eg different capital treatment of similar risks in different sectors).
• There are numerous differences between the core principles - some arising from intrinsic differences between the three sectors, others not readily explained in this way. Differences are found in preconditions, group-wide supervision, cooperation and information sharing, safeguarding of client assets and application of uniform prudential standards.