"The financial crisis that began in 2007 highlighted the significant role financial groups, including conglomerates, play in the stability of global and local economies. Due to their economic reach and their mix of regulated and unregulated entities (such as special purpose entities and unregulated holding companies) across sectoral boundaries, financial conglomerates present challenges for sector specific supervisory oversight. In hindsight, the crisis exposed situations in which regulatory requirements and oversight did not fully capture all the activities of financial conglomerates or fully consider the impact and cost that these activities may pose to the financial system.

Belgian financial conglomerates (FCs) remained important players in the Belgian financial sector, despite significant restructuring following the global financial crisis. FCs operated in multiple streams of the financial sector, especially in banking and insurance. Owing to their economic reach and use of regulated and unregulated entities across sectoral boundaries, FCs presented a challenge for sector-specific supervisory oversight. The Executive Board suggested a pragmatic supervisory approach, which needs to be streamlined and applied more uniformly to contain FC-specific risks.

Despite the intense debate on the advantages and disadvantages of adopting integrated supervision that has taken place in recent years, little is known about the experiences of countries that have adopted it and the obstacles and challenges they have faced to implement it. In an attempt to shed light on this area, the authors present the results of a survey conducted in a group of 15 countries that have adopted integrated supervision. After a brief review of the literature on integrated supervision, the authors examine four topics: 1) The reasons cited by this group of countries for establishing an integrated supervisory agency. 2) The scope of regulatory and supervisory powers of these agencies. 3) The progress of these agencies in harmonizing their regulatory and supervisory practices across the intermediaries they supervise. 4) The practical problems faced by policymakers in adopting integrated supervision. The survey revealed that the group of integrated supervisory agencies is not as homogeneous as it seems. Important differences arise with regard to the scope of regulatory and supervisory powers the agencies have been given. In fact, contrary to popular belief, less than 50 percent of the agencies can be categorized as mega-supervisors. Another finding is that in most countries progress toward the harmonization of prudential regulation and supervision across financial intermediaries remains limited. Interestingly, the survey revealed that practically all countries believe they have achieved a higher degree of harmonization in the regulation and supervision of banks and securities companies than between banks and insurance firms. The survey also identified some practical problems faced by this group of countries in establishing their unified supervisory agencies. The authors discuss these problems, along with the practical lessons and recommendations provided by the 15 agencies to other countries considering integrated supervision, in the final section of the paper.

There have been significant improvements to the legal framework and the supervisory process since the last Basel Core Principles (BCP) review; some additional recommended enhancements are highlighted in this assessment. The Superintendency of Financial Institutions (SFC) is an integrated supervisor with a purview that includes banks, finance companies, insurance, securities, and other financial intermediaries. Additionally, the SFC is also the bank resolution authority. To strengthen consolidated supervision, Congress passed Financial Conglomerates Law (FCL) 1870 addressing the supervision of financial conglomerates and granting the SFC supervisory authority over financial conglomerates (CF).2 The FCL strengthened the framework for consolidated supervision, which already included banks and their subsidiaries, by adding holding companies as supervised entities. Moreover, it defined the scope of supervision of financial conglomerates, setting standards with regards to risk management, adequate capital, and corporate governance, as well as minimum requirements for managing concentration risks and conflicts of interest in intragroup and related party exposures. The SFC has strong coordination and cooperation arrangements with foreign supervisors (through signed Memoranda of Understanding (MOUs) and the coordination mechanisms derived from the CCSBSO, among others) as well as the authority to request information from parent companies, all of which were further enhanced with the issuance of the FCL. Additionally, the SFC has access and authority to require information from ultimate beneficial owners.