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FSB Issues Report regarding Global Adherence to Regulatory and Supervisory Standards on International Cooperation and Information Exchange

Friday, November 4, 2011

Raphael Rosenblatt | Bloomberg LawFSB Press Release No. 55/2011 (Nov. 2, 2011) Responding to a call by G20 leaders to develop a framework of measures to promote adherence to certain standards and cooperation among jurisdictions, the Financial Stability Board (FSB) issued a public statement regarding the compliance of 61 different jurisdictions. The FSB identified those jurisdictions that had been evaluated on the basis of their financial importance and noted that 41 already demonstrate strong adherence to the relevant standards. Additionally, 18 jurisdictions are in the process of implementing reforms to strengthen their adherence, or have decided to request new assessments of their adherence.

Objective

The FSB focused its initiative on "adherence to internationally agreed information exchange and cooperation standards in the areas of banking supervision, insurance supervision and securities regulation." The FSB published the identity of all jurisdictions evaluated in order to recognize the progress most have made toward implementing international cooperation and information exchange standards. Additionally, the specific jurisdictions were identified in order to incentivize improvements in those jurisdictions not fully cooperating. The FSB noted that in the world of global financial markets, cooperation and information exchange between financial supervisors and regulators is essential for effective oversight. Weaknesses in international cooperation and information exchange can undermine regulatory and supervisory efforts. Specifically, the FSB pointed to three key standards in the financial regulatory and supervisory area: (1) the Basel Committee on Banking Supervision's Core Principles for Effective Banking Supervision; (2) the International Association of Insurance Supervisors's Insurance Core Principles; and (3) the International Organization of Securities Commissions's Objectives and Principles of Securities Regulation. Together, these principles are designed to establish a regime of cooperation and disclosure among regulators.

Leading by Example

As part of its initiative for stronger adherence to international standards, FSB member jurisdictions have agreed to "lead by example" by implementing international financial standards, participating in international assessments, and disclosing their degree of adherence. FSB member jurisdictions also agreed to ongoing periodic peer reviews designed to determine the level of implementation and effectiveness of standards and agreed-upon policies within the FSB.

Jurisdictions Evaluated

For the purpose of its final statement, FSB evaluated jurisdictions that "rank highly in financial importance." These included the 24 FSB members, as well as those non-FSB members that ranked highly based on a combination of economic and financial indicators such as (1) domestic financial assets (e.g., gross domestic product (GDP), currency and deposits, equity securities, domestic debt securities, and domestic financial assets); (2) external financial assets and liabilities (e.g., deposits placed abroad, foreign portfolio assets, loans from abroad, liabilities to official institutions, and gross external position); (3) gross capital flow; and (4) market share in selected global market segments (e.g., over-the-counter derivatives turnover, hedge funds assets, pension fund assets, insurance premiums, and cross-border interbank assets). The aggregates used to determine which jurisdictions were subject to FSB evaluation—financial activity in absolute terms, financial activity relative to national GDP, and market share in key segments—were a means of ordering such jurisdictions. The FSB identified 41 jurisdictions, including 17 FSB members, as demonstrating sufficiently strong adherence to relevant cooperation and information exchange standards. 18 jurisdictions were identified as taking recommended action and making improvement, as well as the specific area of concern. Libya and Venezuela were the two jurisdictions identified as non-cooperative because they are not currently engaged in dialogue with the FSB. DisclaimerThis document and any discussions set forth herein are for informational purposes only, and should not be construed as legal advice, which has to be addressed to particular facts and circumstances involved in any given situation. Review or use of the document and any discussions does not create an attorney-client relationship with the author or publisher. To the extent that this document may contain suggested provisions, they will require modification to suit a particular transaction, jurisdiction or situation. Please consult with an attorney with the appropriate level of experience if you have any questions. Any tax information contained in the document or discussions is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code. Any opinions expressed are those of the author. The Bureau of National Affairs, Inc. and its affiliated entities do not take responsibility for the content in this document or discussions and do not make any representation or warranty as to their completeness or accuracy.©2014 The Bureau of National Affairs, Inc. All rights reserved. Bloomberg Law Reports ® is a registered trademark and service mark of The Bureau of National Affairs, Inc.

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