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Cross-Border Supervisory Cooperation - Issues and Challenges How to Please Multiple Country Supervisors. Washington, DC June 7, 2006 Everett Schenk BNP Paribas, Head of North American Territory Corporate and Investment Banking Chairman, Institute of International Bankers. Agenda. - PowerPoint PPT Presentation
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Cross-Border Supervisory Cooperation -
Issues and Challenges
How to Please Multiple Country Supervisors
Washington, DCJune 7, 2006
Everett Schenk
BNP Paribas, Head of North American TerritoryCorporate and Investment Banking
Chairman, Institute of International Bankers
2
BNP Paribas Globally and in the US
BNP Paribas’ Response
Agenda
Improved Cooperation Among Regulators Globally
What’s Next?
3
Leading European Bank with Global Reach, Financially Strong
Presence in 85 countries on the 5 continents
130,000 people worldwide, including BNL
60% outside France 12% in the United States
Net Banking Income (incl BNL) Net Banking Income (incl BNL)
FRB 22 %
CIB 27 %
IRFS 25 %
AMS 14
%BNL 12
%
French
Retail
22 %*
Corp & Invest
Banking 27
%
Int’l Retail
& Financial
Services
25 %*
Asset Mgmt
& Services
14 %
BNL 12 %*
Well-balanced business mix and profitability growing strongly (2005)
Market Cap @ 5/2/06 €70.6bn Net Banking Income (excl BNL) €21.5bn After-tax ROE (excl BNL)
20.2% Net Banking Income by geography (incl BNL)
France 48% Italy 17% Rest of Europe 16% USA 13% Asia & Other 6%
* Retail Banking 59%
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BNP Paribas platform in the US Consistent with Global Organization
Retail Banking
742 branches in the Western United States
and Hawaii 7th biggest bank in the Western US
2 Brands
Corporate and Investment
Banking (CIB)
Asset Management and Services
Advisory & Capital Markets
Financing Activities Securities Services
InsuranceFAMLIDuerr
Private Banking Miami
Asset Management
FFTW
Presence in New York, Chicago, Dallas,
Houston, San Francisco, Los Angeles
and
CooperNeff Advisory
2,250 CIB Staff
12,250 Retail Staff
350 AMS Staff
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Regulatory Environment of BNPP’s US Platform
Financial Holding Co Incorporating all business lines under one regulatory umbrella
Home Country Regulator – Commission Bancaire (France)Primary US Regulators
Federal Reserve Bank of New York, Consolidated Supervisor FDICState Banking Departments, primarily New York
Other Significant RegulatorsNY Stock ExchangeSECNASD
Large Complex Banking Organization (LCBO), subject toOnsight regulatory supervision (6 permanent staff)Targeted, horizontal and peer review examinations
CBOT NYMEX BOX
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BNP Paribas Globally and in the US
BNP Paribas’ Response
Agenda
Improved Cooperation Among Regulators Globally
What’s Next?
7
Improved Productivity of Home/Host Regulatory Relations
Home/Host Country Regulatory Relations have improved enormously over the past few years as bank management and regulators have made strides in improving communication, cooperation, transparency, and standardization of best practices.
Communication Internal communication between a Home Office and its international network Externally - between Home Office and Home Country Regulator
- between local regulated entities and their Host Country Regulators
Cooperation High degree of cooperation between Host and Home Country regulators,
facilitating Increased efficiency for regulators and bank staff Improved quality of examination results Minimization of unnecessary cost and burden
Places a premium on comprehensive and regular internal communication between a Home Office and its foreign operations.
Avoids inconsistent and varying guidance from Home/Host Regulators to the individual banking organization.
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TransparencyPro-active sharing of information with primary regulators to
provide a complete understanding of business and control activities
Globalization of businesses and reporting has improved information flow to all regulators
Standardization of Best PracticesPromoting broader application of improved operations and
controls through Benchmarking of Best Practices and Horizontal Peer Reviews by Regulators, when available.
Contributing to enhanced understanding of local standards by Home Regulators
Improved Productivity of Home/Host Regulatory Relations
9
BNP Paribas Globally and in the US
BNP Paribas’ Response
Agenda
Improved Cooperation Among Regulators Globally
What’s Next?
10
BNP Paribas’ Response to the New Regulatory Environment
Dedicated North American Territory Functions establishedU.S. Regulatory Relationship Oversight Committee Regulatory Relationship Officers covering all of Corporate and
Investment Banking and Retail Banking for the U.S.Corporate Governance Committee and a process by which all
Controls and Risk Indicators are reviewed
0
6
17
39
21
44
23
32
05
1015202530354045
CorporateGovernance
Compliance Legal Audit
2001
2006
Evolution of U.S. Staff Interfacing with the Primary Regulators in the U.S. (Corporate and
Investment Banking)
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Dedicated Global Functions Establishment of a Head Office Regulatory Coordinator for all business lines Reinforcement of the Global Head of Compliance role in Paris Creation of a Globally Centralized Regulatory Relationship Function that
oversees the 11 main international territories for action plans, regulatory communications and review of operational controls
Communication Weekly meeting held between Regulator Relationship Officer and onsite
Regulators for status updates Monthly meetings with the U.S. Regulatory Relationship Oversight
Committee to discuss exams, findings and implementation. Participants include Legal, Compliance, Audit, external Counsel and Head Office Management
Semi-Annual meetings between primary U.S. Regulators and BNP Paribas Management (local and global). Alternative meeting locations between New York and Paris
Creation of a Global Regulatory Relationship Function allows BNP Paribas to communicate effectively to all International Regulators.
BNP Paribas’ Response to the New Regulatory Environment
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BNP Paribas’ Response to the New Regulatory Environment
Addressing Findings/RecommendationsDedicated Internal staff to follow up and help resolve Regulatory
and Internal Audit FindingsDisciplined process for identification of aged or unresolved Findings
are analyzed and escalated to Senior Management, Locally and Head Office
13
BNP Paribas Globally and in the US
BNP Paribas’ Response
Agenda
Improved Cooperation Among Regulators Globally
What’s Next?
14
What’s Next
Develop concrete methods of sharing responsibilities that will produce substantial savings
in aggregate supervisory man hoursand in amount of management and employee time needed by
banks to satisfy various home/host regulators.
Support Chairman Bernanke’s recent call, which was in connection with Basel II implementation, for flexibility among supervisors to ensure appropriate standardization of requirements is combined with flexible accommodation of differing approaches by different institutions that achieve consistent results
Basel II Capital Standards – Encourage the Accord Implementation Group to avoid duplication of validation requirements by home/host regulators
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Recommend increased reliance on home country data and reporting and supervisory analysis
Unless specifically needed to satisfy host country safety and soundness responsibilities.
Particularly essential in wholesale markets where the risks being measured are cross border and global in their effects.
Support further coordination between home/host regulators regarding examinations and on-site oversight.
Proven efficiencies from joint exams currently conducted by multiple domestic regulators with the US
Home/host regulators who share common standards should be especially well equipped to combine their efforts.
What’s Next
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How to Please Multiple Country Supervisors
Everett Schenk
BNP Paribas, Head of North American TerritoryCorporate and Investment Banking
Chairman, Institute of International Bankers