1. Cross-Border Supervisory Cooperation under Basel II and the Revised Basel Core Principles 6th Annual International Seminar on Policy Challenges for the Financial Sector World Bank IMF/Federal Reserve Board Washington 7 June 2006 Kerstin af Jochnick

2. Basel II Core Principles for Effective Banking Supervision Corporate Governance Credit risk Operational risk Market risk Liquidity risk Basel Committee on Banking Supervision

3. Principle 24 Consolidated supervision –Adequately monitoring of all aspects of the business conducted by the group world wide Principle 25 Home-host relationship –Cross border consolidated supervision requires cooperation and information exchange between home and host Core Principles for Effective Banking Supervision

4. Consistent implementation Convergence in supervisory practices Streamlining the supervisory process for cross-border groups Effective consultations Main challenges in implementing Basel II

5. Supervisory Review Process (Pillar 2) Validation of IRB and AMA Systems External Credit Assessment Institutions Harmonisation of reporting requirements Supervisory disclosure Convergence of supervisory practice

6. Supervison of cross border groups Crisis management Information exchange Co-operation and information exchange

7. Supervisory Review Process Internal Capital adequacy assessment process Supervisory review and evaluation process Dialogue Conclusions Number and assessment Internal governance The companyThe supervisor Not fully satisfactory Fully satisfactory

8. Supervisory review process – Cooperation Home/Host Agree plan. Coordination of activities Jointly performing or allocating tasks Agree outcomes Preparation Host supervisor Consolidation supervisor Exchange of information

9. Supervisory cooperation Nordea Memorandum of understanding Supervisory plan Supervisory risk assessment Basel II - Ensure consistent implementation - Joint approval plan and team - Joint supervisory review

10. Conclusion 1.Core principles is the umbrella and Basel II could be one important part 2.The home supervisor is responsible for the oversight of the implementation of Basel II 3.There is need for enhanced and pragmatic cooperation among supervisors. The home supervisors should lead this effort 4.Supervisors should avoid performing redundant and uncoordinated approval and validation work 5.Supervisors should communicate the respective rules of home and host country supervisors.