Consolidated supervision in banking regulation

Abstract

Arguably, the concept of consolidated supervision as adopted via banking regulation principles encourages the banking industry to pursue globalisation strategies, which are a manifestation of management appetite to increase shareholders' wealth. Accordingly, considering the highly protective measures inherent in banking regulation, the granting of permission by supervisory authorities to credit institutions to pursue globalisation strategies through the establishment of subsidiaries and other connected undertakings, particularly if in foreign jurisdictions, seems to be a contradiction. Banking regulation has, over the past decades, adapted itself to address this concept of globalisation such that today banks have subsidiaries and other connected entities spanning all over the world, and supervisors being content therewith! Stemming from consolidated supervision principles are a series of benefits to the regulated. In this respect, consolidated supervision creates new opportunities which are unsustainable under normal supervisory conditions. But there are also difficulties associated with consolidated supervision, which factors have to be weighted by the regulated prior to pursuing globalisation strategies. However, the fact that international banking supervision legislation positively perceives consolidated supervision implies that the resulting benefits and comforts thereto exceed the relevant pitfalls in this respect.