It may be recalled that the Governor had announced in the Mid-term Review of Monetary and Credit Policy for the year 2003-04 about the decision taken in consultation with the Chairman, Securities and Exchange Board of India (SEBI) and Chairman, Insurance Regulatory and Development Authority (IRDA) for establishment of a special monitoring system for Systemically Important Financial Intermediaries (SIFI). The Group has since been renamed as the Working Group on Financial Conglomerates.

The Group has suggested criteria for identifying financial conglomerates, a monitoring system for capturing intra-group transactions and exposures amongst such conglomerates and a mechanism for inter-regulatory exchange of information in respect of conglomerates.

Highlights of the framework proposed by the Working Group are as under:

• The new framework is being proposed as a complementary strand to the already existing regulatory structure - supervision of individual entities by respective regulators viz. RBI, SEBI, IRDA and the system of Consolidated Prudential Reporting recently introduced in regard to banks.
• A set of criteria has been prescribed for identification of financial conglomerates that would be subject to focused supervisory oversight.
• Format has been designed to capture intra-group transactions and exposures amongst group entities, group level exposures to various financial markets and outside counterparties and direct/indirect cross linkages amongst group entities.
• A conglomerate entity identified as the ‘designated entity’ would be responsible for collating data in respect of all its group entities in the prescribed format and submitting the same to its own regulator which would be the ‘Principal Regulator’ for the entire conglomerate.
• One of the existing Technical Committees, consisting of all the three regulators, may function as a standing inter-regulatory forum to address all issues arising out the proposed framework. The Technical Committee would also review the identification criteria periodically.
• The framework envisages periodic sharing of information amongst regulators on (i) concerns arising out of analysis of data received as part of the proposed format; and (ii) any other information outside the reporting format that might have a bearing on the group as a whole.

Press Release: 2003-2004/1458