Session 2 Schenk

7/31/2019 Session 2 Schenk

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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


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BNP Paribas Globally and in the US

BNP Paribas Response

Agenda

Improved Cooperation Among Regulators Globally

Whats Next?


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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)

FRB 22 %

CIB 27 %

IRFS 25 %

AMS 14

%

BNL 12

%

French

Retail

22 %*

Corp & Invest

Banking 27 %

Intl Retail

& Financial

Services

25 %*

Asset Mgmt

& Services

14 %

BNL 12 %*

Well-balanced business mix and profitabilitygrowing 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 theWestern United States

and Hawaii7th biggest bankin the Western US

2 Brands

Corporate andInvestment

Banking (CIB)

Asset Managementand Services

Advisory & CapitalMarkets

Financing Activities SecuritiesServices

Insurance

FAMLIDuerr

Private BankingMiami

Asset ManagementFFTW

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 BNPPs 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

FDIC

State Banking Departments, primarily New York

Other Significant Regulators

NY Stock Exchange

SEC

NASDLarge Complex Banking Organization (LCBO), subject to

Onsight regulatory supervision (6 permanent staff)

Targeted, horizontal and peer review examinations

CBOT

NYMEX

BOX


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Agenda


Whats Next?


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Improved Productivity of Home/Host Regulatory Relations

Home/Host Country Regulatory Relations have improved enormously over thepast few years as bank management and regulators have made strides in

improving communication, cooperation, transparency, and standardizationof 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 betweena Home Office and its foreign operations.

Avoids inconsistent and varying guidance from Home/Host Regulators to theindividual banking organization.


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Transparency

Pro-active sharing of information with primary regulators to provide acomplete understanding of business and control activities

Globalization of businesses and reporting has improved information flow

to all regulators

Standardization of Best Practices Promoting 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


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Agenda


Whats Next?


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BNP Paribas Response to the New Regulatory Environment

Dedicated North American Territory Functions established

U.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

0

5

10

15

2025

30

35

40

45

Corporate

Governance

Compliance Legal Audit

2001

2006

Evolution of U.S. Staff Interfacing with the PrimaryRegulators 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.



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Addressing Findings/Recommendations

Dedicated Internal staff to follow up and help resolve Regulatory andInternal Audit Findings

Disciplined process for identification of aged or unresolved Findings are

analyzed and escalated to Senior Management, Locally and Head Office


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Agenda


Whats Next?


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Whats Next

Develop concrete methods of sharing responsibilities that will produce

substantial savings in aggregate supervisory man hours

and in amount of management and employee time needed by banks to

satisfy various home/host regulators.

Support Chairman Bernankes recent call, which was in connection withBasel 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 especiallywell equipped to combine their efforts.

Whats 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

Session 2 Schenk

Documents

Transcript of Session 2 Schenk