Daniel Tarullo, a member of the Board of Governors of the Federal Reserve System, gave a speech in Chicago 2-weeks ago attended by friends in which he laid out the argument for a Shared Responsibility for the Regulation of International Banks. The event was sponsored by the Chicago Fed and the World Bank. Mr Tarullo began his speech with a reminder of the risks and rewards of a global banking system and then underscored the supervisory challenges that exist in such complex constructs, including the limitations of home and host country regulation networks. But importantly, he also sketched out suggestions to improve current supervisory arrangements. This includes continuation of the long-standing arrangement of consolidated (i.e., home) regulation - including monitoring for any inter-subsidiary risk-shifting/booking, consideration of the benefits of branching, and greater co-ordination of capital adequacy calculations between local and consolidated supervisors.
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