The Joint Forum on Financial Conglomerates, an international group of senior bank, insurance and securities supervisors, released final documents Feb. 18 on the supervision of large financial groups. The documents were criticized last week by a group of large international institutions.

The guidance addresses some of the issues faced by supervisors of large groups with mixed activities, including banking, insurance and securities.

The release was called unfortunate by an official of the Institute of International Finance, a group that represents most of the largest financial institutions worldwide.

"It is highly disappointing that the Joint Forum chose to not make significant changes to the techniques used for assessing capital adequacy," said Barbara C. Matthews, the IIF’s banking advisor and regulatory counsel. Specifically, the forum does not discuss risk-based approaches, she said. Furthermore, on controlling intra-group risk, the issues would be best addressed by controlling it through standards on affiliate transactions and limits on intra-groups concentration credit, she said.

While documents released by affiliates of the Switzerland-based Bank for International Settlement are usually used as reference by financial regulators, this one may become obsolete shortly, observers noted.

If a proposal announced two weeks ago and supported by the Group of 7 is adopted, a Financial Stability Forum could be created soon that would supersede the BIS joint forum. Furthermore, since the International Monetary Fund would be part of the new forum, it is likely that existing BIS guidance would be revisited, sources said.