BIS, IAIS conduct global financial surveys

MANILA, Philippines - The Bank for International Settlements (BIS) and the International Association of Insurance Supervisors (IAIS) have proposed to back up the banking and insurance industries in dealing with the present and future financial shocks worldwide.

The BIS serves central banks in their pursuit of monetary and financial stability, and to foster international cooperation in those areas. It is often referred to as the central bank of all central banks.

The IAIS, on the other hand, is a global standard-setting body for the insurance industry whose objectives are to promote effective and globally consistent regulation and supervision of the industry in order to develop and maintain fair, safe and stable insurance markets for the benefit and protection of policyholders; and to contribute to global financial stability.

Both are headquartered at Basel in Switzerland.

The BIS issued early this year a survey-proposal for new conditions under the so-called Basel III framework. It is presently reviewing the feedback on its proposals from different central banks as well as individual banks. It is expected to make final recommendations for central bank governors and heads of supervision end July or early August this year.

It is one of the many proposal-consultations it had made in laying down the risk-weighted capital framework for all banks in anticipation of future shocks in the global financial system.

In fact, it has triggered global discussion on capital levels that will form Basel III, including proposals’ implications and what risk managers will need to brace for.

In the Philippines, bankers are estimating that after the Bangko Sentral ng Pilipinas (BSP) has absorbed its implications, the Tier 1 capital adequacy ratio (CAR) would shift from the present 10 percent to at least 12.5 percent.

Foreign and domestic bankers said that changes being proposed would increase the amount of capital required to support any given level of banking assets, to increase the percentage of equity capital within that capital, and to increase the level of required holdings of liquid assets relative to banking assets.

The present CAR level suggested by the BIS is eight percent.

Meanwhile, the IAIS released the 2012 draft of the Common Framework for the Supervision of Internationally Active Insurance Groups, or ComFrame, marking the completion of the second step in its three-year development phase.

The international body urged supervisors, insurers and other interested parties to submit their comments or suggests before the end of August this year.

ComFrame is an integrated, multilateral and multidisciplinary framework for the group-wide supervision of internationally active insurance groups, or IAIGs.

“It builds on, and complements, the IAIS’ Insurance Core Principles, standards and guidance, which were updated in October 2011 and are applicable to all insurers and insurance groups, unless otherwise specified,” it said.

The four main benefits of the framework are: customization of supervisory requirements and processes; convergence fostering; reduce complexities; and, coordination and cooperation enhancements.

IAIS executive committee chairman Peter Braumuller said that the increasingly globally interconnected financial marketplace, supervisors need the ability to efficiently coordinate and cooperate across multiple borders.

“ComFrame will provide the foundation needed to effectively work together in supervising complex cross-border insurance groups and, in addition to contributing to global financial stability, will help protect the individual policyholder,” Braumuller added.