Overview of comments received

Home-host information sharing for effective Basel II implementation

June 2006

Eleven comment letters were received from banks, industry associations and banking supervisory authorities in response to the November 2005 consultative paper on Home-host information sharing for effective Basel II implementation. These letters expressed generally strong support for the paper and the importance of establishing effective means of sharing information to avoid duplication of effort and thereby reduce the burden on both banks and supervisors.

The following changes were made in response to the very useful comments received on the consultative draft of the paper:

  • Pillar 2 has been more strongly highlighted as a key area for discussion among home and host supervisors;
  • Greater emphasis has been placed on the principles of materiality and proportionality in determining information-sharing arrangements;
  • The importance of confidentiality arrangements covering both supervisors and external parties working on their behalf has been strengthened;
  • Supervisors are asked to take into account the information needs of supervisors that may lack expertise or resources to fulfil particular validation-related duties;
  • Supervisors are encouraged to keep banks informed of information-sharing arrangements and include them in discussions of such arrangements where appropriate;
  • The paper clarifies that the application of Basel II to foreign branches is a matter of national discretion; and
  • The link between effective supervisory cooperation and financial stability has been highlighted.

Several commenters expressed a desire for the paper to go beyond its stated aim of focusing on information sharing in the context of Basel II. For example, it was suggested that the paper could be made more prescriptive, perhaps in line with legal arrangements adopted in particular countries or groups of countries. The Committee and CPLG are of the view that such prescription, in light of differences across jurisdictions and the importance of a tailored approach to information sharing on a bank-by-bank basis, would not be practical.

Other commenters, meanwhile, suggested that the paper could be broadened to include such topics as information sharing during stress conditions or conflict resolution. As indicated in the paper, Basel II is a high short-term priority that merits immediate attention. Over the longer term, the Committee expects that the information-sharing mechanisms developed in the implementation of Basel II will have a beneficial impact on broader areas of supervisory cooperation.

Finally, several commenters opined that the paper placed too much emphasis on the flow of information from banks to supervisors. The Committee and CPLG disagree, and believe that the paper strikes an appropriate balance between what information supervisors can reasonably be expected to obtain from fellow supervisors and from banks in the implementation of Basel II. In this regard, the paper reaffirms the longstanding principle that banks must provide supervisors the information necessary to assess safety and soundness.