Consolidated Supervision and Financial Conglomerates
Prudential rules—particularly capital adequacy requirements—apply on a consolidated basis. This means that when a bank owns subsidiaries or is itself owned by a parent company that owns a broader group of companies, the assets and liabilities of all these companies are considered in assessing whether or not the bank meets the relevant prudential standards.
This practice is known as consolidated supervision. The term covers two distinct but related concepts. The first relates to geography, i.e., banking groups operating on a cross-border basis. In this sense, consolidated supervision is the attempt to ensure that all the assets and liabilities of a group, no matter where in the world ...
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