The Basel Committee has issued the paper, Home-Host Information Sharing for Effective Basel II Implementation, on the subject of information sharing between a regulated organisation's home supervisor and the host supervisors in those countries where that organisation does business. This paper, originally issued last November for consultation, has now been re-issued taking into account comments from banks, industry associations and supervisors.
The six Basel II high-level principles have not changed – no change in legal responsibility for national supervisors; the home supervisor takes responsibility for an international group; the needs of host countries being recognised; supervisor to work together and this to be lead by the home supervisor; avoiding banks having to duplicate their approval and validation work; and supervisors getting together to tell international banking group of their obligations. The main change is the degree of emphasis on host supervisor requirements with greater recognition on the rights of these to place their own local capital and risk management conditions on local branches and subsidiaries of international banks.
Despite repeated emphasis on avoiding duplicated effort on the part of supervised banks, the paper reaffirms the principle that banks will have to provide what home and host supervisors deem necessary, and accepts that these two bodies may have differing requirements. One imagines that these changes have been in response to concern from certain national supervisors that, the bulk of their banks being foreign owned, they would lose control of their entire national banking market. In recent months, the Polish authorities, within Europe, have been vocal regarding this situation.
Another issue is the fact that local confidentiality laws may impede information sharing between supervisors. Also, even where confidentiality laws are not the issue, their will be concern at the greater distribution of market-sensitive proprietary information. The paper gives no solution to these issues other than to encourage greater collaboration between supervisors.
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