Mandate of the Joint Forum

The Joint Forum is a group of technical experts working under the umbrella of the following three international groupings of supervisory bodies: the Basel Committee on Banking Supervision, the International Organization of Securities Commissions and the International Association of Insurance Supervisors. The work of the Joint Forum encompasses issues relating to financial conglomerates as well as issues that are of common interest to the three parent committees as described below.

The Joint Forum continues to work in cooperation with other international bodies on issues where it shares a common interest.

The Joint Forum should follow a work plan that is consistent with and reflects the priorities of its parent organisations. Topics may not necessarily be taken up or finished in the same time frame.

A. Issues of common interest to the three parent committees

(1) The Joint Forum should study issues of common interest to the three financial sectors and develop guidance and principles and/or identify best practices, as appropriate, in particular for:

Risk assessments and management, internal controls and capital;

The use of the audit and actuarial functions in the supervision of regulated entities and corporate groups containing regulated entities;

Corporate governance, including fit and proper tests;

Outsourcing by regulated firms of functions and activities;

Different definitions of banking, insurance and securities activities and the potential that they may lead to regulatory arbitrage; and

Identifying the core principles of the banking, insurance and securities sectors that are common and understanding the differences where they arise.

(2) The Joint Forum has specific mandates as follows:

To undertake further work on risk assessments and capital and, if appropriate, develop further guidance and principles and/or identify best practices, with special focus on the following areas:

Risk Aggregation. - Approaches used by firms to manage and aggregate risks across multiple businesses and risk categories (e.g. credit, market, insurance, operational risks, etc.) and approaches used by supervisors to address the challenges of firms whose activities span multiple businesses and risk categories (e.g. capital distribution in groups).

Operational Risk management. - Efforts and approaches that firms are making to address operational risks in all their businesses and globally. Approaches of firms that may take on transferred operational risks.

Credit risk management and transfer. - Promote supervisory information sharing on issues relevant to credit risk transfer and aggregation of these risks in the firm as a whole.

Disclosure of Financial Risks. - Following up on the recommendations of the April 2001 Multidisciplinary Group on Enhanced Disclosure (MWDED):

Consider further (1) the means of expressing vulnerability to risk concentrations in market, credit, and insurance risks; (2) credit quality disclosure; and (3) additional development of risk assessment concepts and methods, such as those relating to market liquidity risk and potential future credit exposures.

Evaluate (1) the degree to which regulated financial intermediaries have complied with the four key recommendations contained in the Fisher Report; and (2) the degree to which (generally unregulated) hedge funds have complied with the four key recommendations

Cross-sectoral implications of extreme exogenous shocks. - Regulatory forbearance, cross-sectoral cooperation and co-ordination in emergency situations, prudential robustness and contingency planning.

B. Issues relating to financial conglomerates

(1) The Joint Forum should enable bank, insurance and securities supervisors to share information about issues arising from the implementation of the principles issued and techniques developed by the Joint Forum. These pertain to:

coordination;

supervisory information sharing;

capital adequacy;

fit and proper tests;

intra-group transactions and exposures; and

risk concentrations.

The work may involve developing best practices to give effect to the principles set out in the papers.

(2) The Joint Forum has specific mandates as follows:

to study financial conglomerate structures that may impair effective supervision or otherwise be problematic, and, having regard to the findings of that study, if appropriate, develop guidance and principles and/or identify best practices; and

to assess the appropriateness of group-wide methods of supervision, and, having regard to the findings of that assessment, if appropriate, develop guidance and principles and/or identify best practices.