Let me give you some examples:  Table 1: The home-host relationship (both bank and group) Systemic HOST country  relevance  Systemic relevance Significant in HOME country  in Systemic relevance HOST country  in  Non-significant  Significant  Potential conflict of and coordination problems  interest Not a big problem  Non-significant  Potential conflict of and coordination problems  interest Not a big problem  … when branches and subsidiaries become systemically relevant Suppose there is a banking group of roughly equal systemic relevance in the home country and the host country. The home country supervisor is the consolidating supervisor and coordinates the activities vis-à-vis the group. If cooperation works well, the host supervisor will receive information from the home supervisor. But in the event of a crisis in the banking group, all authorities have a clear mandate to only protect their depositors and systems. One can easily imagine a situation where, as in my earlier example, the group has surplus capital in one of its parts, extra liquidity in another and the cause of the problem is in a third part. The lack of coordination might very well result in a worse (more costly) outcome for all involved. If the presence in the host country is a branch and not a subsidiary, the host supervisor has only limited means of obtaining information about – or taking actions against – the bank.
Solvency II one year in Speech given by David Rule, Executive Director of Insurance Supervision  Association of British Insurers, London 21 February 2017  1  All speeches are available online at www.bankofengland.co.uk/speeches  We are approaching the first round of annual results and disclosures under Solvency II. Today, I want to recap how Solvency II was designed to work for the UK insurance industry; to look back on our approach to implementation and experience of operating the Solvency II framework in the first year of its life; and to pick out a few areas where we now know that Solvency II needs improvement, in particular the impact the current design of the risk margin is having on UK annuity writers’ Solvency Capital Requirements (SCRs) and associated use of so-called Transitional Measures on Technical Provisions, which firms will be disclosing over the next few months. My focus will be life insurance, although I will touch on general insurance too along the way. First, some history. Prior to Solvency II, the UK regulatory regime for insurance had been designed by the Financial Services Authority in the early 2000s. One of its primary aims was to address the lessons from the near failure of Equitable Life in 2000. That company’s problems crystallised when it emerged it had insufficient funds to meet guaranteed rates on annuities. It lost a House of Lords court case brought by policyholders with these guarantees, leaving it with a liability of £ billion and forcing its closure to new 1  business.