Basle Committee releases paper on the Supervision of Cross-Border Banking

The Basle Committee on Banking Supervision is today making public a report on the Supervision of Cross-border Banking that was endorsed by banking supervisors from 140 countries at the June 1996 International Conference of Banking Supervisors in Stockholm. The report, compiled by members of the Basle Committee on Banking Supervision and the Offshore Group of Banking Supervisors, contains twenty-nine recommendations designed to strengthen the effectiveness of the supervision by home and host-country authorities of banks which operate outside their national boundaries. It builds on an earlier Basle Committee report "Minimum Standards for the Supervision of International Banking Groups and their Cross-border Establishments"issued in July 1992.

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. The starting point is that home supervisors must be able to make an assessment of all significant aspects of their banks' operations, using whatever techniques are central to their supervisory process, including the conduct of on-site inspections. Many of the 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. In particular, the paper contains recommended procedures for the conduct of cross-border on-site inspections by home-country supervisors. It also recommends a set of conditions designed to ensure that information obtained by bank supervisors from their supervisory colleagues in other countries remains confidential.

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. This section contains guidelines for determining the effectiveness of home-country supervision, for monitoring supervisory standards in host countries, and for dealing with corporate structures which create potential supervisory gaps.

It is recognised that some of the recommendations in the paper are in conflict with bank secrecy or similar legislation in certain countries. Where this is so, supervisors have agreed to use their best endeavours to have the conflicting legislation amended. In order to set some sort of target for legislative changes, it was agreed in Stockholm to review the evidence of individual countries' compliance with the recommendations in time for the next ICBS in October 1998.

The text of this report can be obtained from the BIS Web Site on the Internet at http://www.bis.org as from 8th October.

8th October 1996