As I noted earlier, we are open to hosting cross-border business in the UK – but only if it 5  https://www.bankofengland.co.uk/prudential-regulation/publication/2020/statement-regarding-supervisory-cooperation-on-operationalresilience 5  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  5  is appropriately controlled and governed, and if we have sufficient visibility of and influence over the necessary supervisory outcomes. Firms must meet our Threshold Conditions, which make specific mention of us being able to effectively supervise the risks which arise from being part of a group (including any impact of a parent being subject to regulation overseas)— which is particularly relevant to international groups. Those firms who have been supervised by us for a long time should recognise the substance of what is set out in the consultation. And EEA branches, who have until recently passported into the UK, will recognise our supervisory expectations from their extensive engagement with us as part of the branch authorisation process. The substance of our expectations is stable and consistent; by making them transparent it will make it easier for firms to identify any gaps and plot their course to meeting those standards. In particular, I’d like to highlight three areas: o  Information sharing;  o  Governance; and  o  Booking models. Information sharing  The statement sets out the types of information we expect to receive from firms on their group operations.
On the regulatory side, thc adoption of a risk-focused supervisory framework entails a shift away from a rigid, rules based approach to regulation and towards more “incentive compatible” prudential standards. By “incentive compatible”, I am referring to broad, principles based standards that encourage banks to develop and continuously update their internal risk management systems to ensure that it is commcnsurate with the scope and complexity of its operations. While the benefits are obvious, there are also some consequences for the supervisory side of our business that may not be readily transparent. First, an emphasis an broad prudential standards - while useful rot fostering sound risk management practices - will inevitably create significant challenges for front-line supervisors. This is because they will need to rely much more on sound professional judgment and critical analysis, and less on rules-based compliance criteria, in order to make proper risk assessments. This in turn, will require supervisory staff members to have a fundamental grasp of risk-based supervisory concepts and how it is applied in the field. The challenge for every emerging market supervisory authority is to equip our front line supervisors with the requisite knowledge, skills, and abilities, in order to help make their transition to a risk-based framework as smooth as possible. At the Bank of Thailand, we have placed greater reliance an this risk-based philosophy during the past several years.