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Financial Convergence
The Insurance Committee started working on financial convergence about 10 years ago. At that time, many considered that this issue was not worth examining since it was and would remain an isolated and marginal phenomenon.
A first study devoted to the bancassurance issue was, however, published in 1992: Insurance and other financial services and another one in 1993: Finanical Conglomerates. More recently, two reports on Financial convergence were issued: Convergence in the financial services industry and Financial services integration world-wide: promises and pitfalls. A questionnaire on the development of financial convergence in OECD countries has also been launched to take account of this rising phenomenon.
Financial convergence expands at different levels: the financial industry through the production and/or distribution of different financial services and/or at the regulatory and supervisory level.
Concerning the industry level, the development of financial convergence encompasses commercial and investment banks and insurance and pension activities. The following issues have also been addressed:
- the nature and scope of financial convergence in the industry sector
- the main reasons for this development in OECD countries
- the enhanced competition in the private pension sector through the distribution / production of pension products by insurance companies and banks ...
- the risk and problems stemming from this innovative financial structure and products.
The regulatory and supervisory framework had to adapt to these developments. An important trend during the past few years has been the implementation of consolidated financial service supervision. Some OECD Member Countries have already moved towards consolidated supervision, others are considering the issue.
- The rationale behind this reform is that, if the financial sectors are integrating, supervisory bodies might do the same in order to minimise the problems of information sharing and co-ordination associated with sectoral supervisors. In concept it would also permit a less complex approach for addressing issues such as transparency, multiple and excessive gearing, fit and proper requirements and contagion.
- Yet, it is also argued that existing solo regulatory approaches augmented by information sharing and agreement on co-ordination issues are adequate and involve less disruption. Besides, arguments have been made that product differences justify separate regulatory approaches.
For now, no international consensus has emerged on this issue.
See also the following documents in pdf:
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