Initiative on Cooperation and Information Exchange
Cooperation and information exchange amongst financial supervisors and regulators are essential for effective oversight in an integrated financial system. Financial markets are global in scope and, therefore, weaknesses in international cooperation and information exchange can undermine the efforts of regulatory and supervisory authorities to ensure that laws and regulations are followed and that the global operations of the financial institutions, for which they have responsibility, are adequately supervised.
The FSB commenced in March 2010 an initiative to encourage the adherence by all countries and jurisdictions to regulatory and supervisory standards on international cooperation and information exchange. The initiative responded to a call by the G20 Leaders at their April 2009 Summit in London for the FSB to develop a toolbox of measures to promote adherence to prudential standards and cooperation with jurisdictions. The initiative is part of a broader framework that the FSB has put in place for encouraging stronger adherence to international standards. The FSB Standing Committee on Standards Implementation (SCSI) is responsible for managing the initiative, under the direction of the FSB Plenary. An Expert Group under the SCSI has been formed to implement the initiative.
Monitoring adherence to select cooperation standards
The focus of the initiative is on adherence to internationally agreed information exchange and cooperation standards in the areas of banking supervision, insurance supervision and securities regulation. Relevant principles were selected from the following three key standards in the financial regulatory and supervisory area:
BCBS Core Principles for Effective Banking Supervision,
IAIS Insurance Core Principles, and
IOSCO Objectives and Principles of Securities Regulation.
The selection of principles was based on two criteria: those that relate directly to cooperation and information exchange, and those that relate to essential supervisory powers and practices, without which effective cooperation and information exchange cannot take place (see Annex A of the December 2014 annual update for more details on the principles selected for the initiative).
Principles that solely or mainly concern cooperation and information exchange in the areas of tax, anti-money laundering or combating the financing of terrorism were excluded because adherence to these is evaluated by other international bodies, notably the OECD and FATF.
Jurisdictions prioritised for evaluation
Under the initiative, the FSB initially prioritised a pool of about 60 jurisdictions for evaluation, including all 24 FSB member jurisdictions together with non-FSB jurisdictions that rank highly in financial importance based on a combination of economic and financial indicators. In December 2014, the FSB announced that the evaluation process would be extended in 2015 to 6 new jurisdictions, based on an updated ranking of the financial importance of jurisdictions. (The ranking process is described in more detail in Annex B of the December 2014 public update).
Adherence is evaluated by the FSB based on the latest available detailed assessment reports underlying the IMF-World Bank Report on the Observance of Standards and Codes (ROSC), as well as on the signatory status to the IOSCO Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (MMoU).
For jurisdictions that have not demonstrated sufficiently strong adherence to the standards, the FSB enters into a confidential dialogue with the authorities concerned in order to further evaluate compliance with the relevant standards and possible ways to improve adherence to standards. The dialogue is conducted by an expert team composed of specialists in banking, insurance and securities from FSB member bodies.
To promote the adherence of jurisdictions to international financial standards concerning cooperation and information exchange, the FSB has available a toolbox of possible measures. The toolbox, which was updated in 2014 (see Annex C of the December 2014 public update) is a balance of both positive measures, such as policy dialogue and technical assistance, and negative measures, such as increased supervisory examination or requirements.
To recognise the progress that most jurisdictions evaluated by the FSB under the current initiative have made towards implementing international cooperation and information exchange standards, and to incentivise improvements by those jurisdictions not cooperating fully, in November 2011 the FSB first published the names of all jurisdictions evaluated, including those identified as non-cooperative jurisdictions. Annual status updates have been published subsequently.
Out of the 60 jurisdictions in the evaluation pool as of 19 December 2014, 46 jurisdictions had demonstrated sufficiently strong adherence to the selected standards (see list in table 1 of the 2014 public update), 13 were taking the actions recommended by the FSB but had yet to demonstrate sufficiently strong adherence (see list in table 2), and one, Venezuela, was determined to be non-cooperative for not having engaged in dialogue with the FSB. On 19 June 2014, the FSB issued a notice advising financial institutions to be aware that Venezuela had been determined by the FSB to be a non-cooperative jurisdiction and therefore to exercise appropriate caution in conducting business in Venezuela or with financial institutions supervised by the Venezuelan authorities.