To assist supervisors in developing and applying more consistent standards, the Committee created the Accord Implementation Group, or “AIG”, precisely to share experiences and encourage shared approaches. This group, which is chaired by Nick Le Pan, the Canadian Superintendent of Financial Institutions, has already been long at work and provides a forum for supervisors to compare notes on practical matters. As a result, we expect that supervisors will apply the New Accord more consistently at home, thereby promoting a more level playing field across countries as well. Based on the AIG’s work to date, the Committee published a paper this past August on the “high level principles for the cross-border implementation of the New Accord”. In this paper, we reiterate our view that the traditional allocation of responsibilities to home and host supervisors will continue. Cooperation will be critical to the effective supervision of institutions under the New Accord, especially considering the challenges an internationally active bank will face in receiving the initial approval to adopt, and then validate, advanced approaches to credit and operational risk at home and in host jurisdictions. Similarly, supervisors will need to find practical ways to cooperate in the evaluations of capital adequacy under pillar 2 and ongoing reviews of compliance with the minimum operational requirements of the New Accord. At the same time, Pillar 3 - market discipline - draws on the power of markets to help ensure that banks do not hold unrealistically low amounts of capital for operational risk.
Pre-determined trigger events do not only have to be weather–related risks 5. Travel, power outage, cyber threat and business interruption risks caused by supply chains may also benefit from pre-determined payouts. There are thus ample opportunities for the industry to test or pilot such innovative offerings. On our end, the Bank is committed to provide a more enabling environment for the industry to explore, test and introduce innovations. For areas that may require regulatory flexibility, we plan to enhance the Regulatory Sandbox with pathways to accelerate time-to-live testing by simplifying the gatekeeping process for institutions with strong risk management capabilities. We expect to announce more details on this later in the year and hope to see greater participation by the industry to offer innovative protection solutions through the enhanced Regulatory Sandbox. Expanding the horizons for the future of insurance – augmenting protection with prevention Lastly, it is also imperative to augment the future of insurance to include risk prevention. Insurers and takaful operators have always played this role. For years, the industry has provided consumers with loss prevention advice for commercial lines. Ways and demands on risk prevention, however, are evolving. We expect to see a collective shift in the role of the industry from loss reimbursement to loss control and prevention in the upcoming years.