Global financial regulators say that while progress has been made towards enhancing the oversight of financial conglomerates, there are still gaps in their supervision, and regulators may not be adequately prepared for some of these issues in the next financial crisis.

The Joint Forum — a group which includes global banking, securities and insurance regulators — issued a report Wednesday that details the results of a recent self-assessment survey of regulators from various countries (including Canada), which looks at how regulators are supervising financial conglomerates and various cross-sectoral issues. The report indicates that “general progress” has been made since it last examined this issue in 2011. However, it also identified several notable gaps and issues.

For example, the report notes that not all of the jurisdictions that were surveyed have a specific supervision framework for financial conglomerates, or coordination agreements with other regulators. Gaps also exist in the coordination of on-site and off-site supervision with other domestic or international regulators, and in arrangements for taking enforcement actions with other domestic or international authorities.

It also warns that “there appear to be insufficient specific mechanisms for supervisory cooperation and coordination in periods of crisis/stress, thereby possibly hindering effective intervention in times of crisis.”

And, it says that there may be “scope for regulatory arbitrage owing to differences in the regulatory and supervisory framework” for conglomerates, although no specific examples of regulatory arbitrage were mentioned in the survey responses, it says.

Given the progress that has been made on ensuring adequate supervisory arrangements for conglomerates, the Joint Forum concludes that “jurisdictions should be allowed time to make further progress” with their implementation of globally-agreed principles for dealing with conglomerates. And, it says that it plans to revisit the gaps it found, and other issues, in a year’s time.

“Supervisory colleges are key to supervisory cooperation, coordination and information-sharing on financial conglomerates. Therefore the implementation of the Joint Forum’s principles for colleges is critical and will continue to be monitored,” said Thomas Schmitz-Lippert, chairman of the Joint Forum and executive director, international policy, at the German Federal Financial Supervisory Authority (BaFin).