40.27 Principle 12: [Reference documents: BCBS, Principles for the supervision of financial conglomerates, September 2012; BCBS, Home-host information sharing for effective Basel II implementation, June 2006; BCBS, The supervision of cross-border banking, October 1996; BCBS, Principles for the supervision of banks’ foreign establishments, May 1983; BCBS, Consolidated supervision of banks’ international activities, March 1979; SCO10.] The supervisor supervises the banking group on a consolidated basis, adequately monitoring and, as appropriate, applying prudential standards to all aspects of the business conducted by the banking group worldwide.

40.28 Essential criteria:

(1) The supervisor understands the overall structure of the banking group and is familiar with all the material activities (including non-banking activities) conducted by entities in the wider group, whether domestic or cross-border. The supervisor understands and assesses how group-wide risks are managed and takes action when risks arising from the banking group and other entities in the wider group, in particular contagion and reputational risks, may jeopardise the safety and soundness of the bank and the banking system.