The European Commission has this week revealed plans for a conference on the regulatory challenges of supervising “large complex groups” in the financial sector, due to be held in Brussels on the 7 June. The conference, which will include panel discussions involving executives from key European financial institutions, will likely involve a great degree of debate about the best approach to tackling risk and data challenges in a cross border environment. The data issues are likely to form an integral part of the three main conference sessions in light of the recent regulatory focus on living wills.
The three main topics of discussion during the one day event will be: the supervisory framework; feedback on the industry’s perspective; and third countries’ pragmatic approaches to regulation of these large financial groups. The challenges faced during the process of regulating conglomerates have been a popular topic for debate among regulators of late. The topic has featured within papers such as the Joint Forum’s paper on the Differentiated Nature and Scope of Regulations, the US Treasury’s Regulatory Reform White Paper, and the Australian regulator’s consultation paper on Conglomerate Supervision, to name just a few.
The challenge of a lack of standardisation in the entity identification space has been a key topic for discussion within this arena. The inability to track entity exposure across a firm’s various subsidiaries and therefore assess counterparty risk was perfectly highlighted by the fall of Lehman Brothers and has been a point of regulatory concern for some time now. The European Commission and the US regulatory community have both committed to tackling this issue and this forms part of their overall agenda to restore the supervisory framework for large complex financial services groups and address systemic risk monitoring.
One of the speakers for the conference is Thomas Huertas, director of the banking sector for the UK Financial Services Authority (FSA) and vice chairman of the Committee of European Banking Supervisors (CEBS), who has been doing his level best to raise awareness of the data management challenges of living wills regulation. The regulatory community has already warned firms that it will run ‘fire drills’ to check that they are able to produce the data for winding up in a timely fashion, which given the current state of most data architectures in these large firms, wouldn’t be a pretty process if they tried it any time soon. The regulators will be therefore checking that firms could in fact generate the details of such information, including granular detail such as counterparty exposures on a position level, on short notice.
Overall, the European Commission is hoping that the conference will provide an opportunity for it to receive input for a clear agenda about the correct way forward in regulating these large entities. Individuals interested in attending the free conference may register by sending an email, with their full name and the name of their organisation, to: email@example.com.