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Is Financial Regulation

Leading or Following the

Markets?

Cross-border capital flows have reversed,falling by 82 percent

1 Compound annual growth rate.Source: McKinsey Global Institute, Global capital markets: Entering a new era, September 2009.

Total cross-border capital inflows $ Billion, using 2008 exchange rates

Global Committee Structure- A Regulator’s View

G-

(Gov’ts)

Financial Stability

Board

WTO

OECD(Gov’ts)FATF

(Money Laundering)

IASB

(Accounting

IASC

Bank for International

Settlements (Central Banks)

G-

(Central Banks)

CGFS

CPSS

Basel Committee

(Banking)

IOSCO

(Securities)

Joint Forum

IAIS

(Insurance

)

Monitoring

Group

IAASB(Audit)

PIOB

IMF

World Bank

(Gov’ts)

IFIAR(Audit)

Source: Adapted with permission from Sloan andFitzpatrick in Chapter 13, The Structure ofInternational Market Regulation, in FinancialMarkets and Exchanges Law, Oxford UniversityPress, March 2007.

IOSCO Structure

Presidents’ CommitteeExecutive Committee

Regional Committees

• Asia-Pacific
  • Europe
    • Interamerican
      • Africa-Middle-East

Emerging

Markets

Committee

Working Groups

• Disclosure and Accounting (WG1)
  • Secondary Markets (WG2)
    • Market Intermediaries (WG3)
      • Enforcement & Cooperation (WG4)
        • Investment Management (WG5)

Specific issue Task Forces

Principles

Implementation

Committee

SRO Consultative

Committee

Co-ordination

Committee (with Basel

and IAIS)

Chairs’ Task

Force

TechnicalCommittee

Standing Committees

•Multinational Disclosure and

Accounting (SC1)

•Secondary Markets (SC2)

•Market Intermediaries (SC3)

•Enforcement & Cooperation (SC4)

•Investment Management (SC5)

Specific issue Task ForcesE.g. CPSS-IOSCOInternet Task Force

Source: Adapted with permission from Sloanand Fitzpatrick in Chapter 13, The Structure ofInternational Market Regulation, in FinancialMarkets and Exchanges Law, Oxford UniversityPress, March 2007.

“Reshaping the global financial and regulatory system”•

Financial Stability Board with standing committees

Membership of FSB, Basel etc extended to BRICs andothers

Expanded coverage of regulation to include systemichedge funds

Tighter controls on offshore centres

Tighter regulation of credit rating agencies

More and better quality capital in the banking system

Macro-prudential mechanism to respond to asset pricebubbles

Regulatory controls on bank remuneration

G20 Summits

National Regulatory Structures

Tripartite

Dual

'Twin Peaks'

Unified regulator

Source: How Countries Supervise their Banks, Insurers and Securities Markets 2007:Central Bank Publications.

57

35

2

49

3

54

28

7

10 39

Other bankregulators

Centralbanks asbankingregulator

Centralbank as onepillar No CentralBankinterest

CentralBank Non-CentralBank

Central Banks in Regulation

54

29

50 10

Central Bank asBankingSupervisor only

Central Bank withBanking and otherresponsibilities

Central Bank asunified regulator

Central Bank withno directsupervisionresponsibilities

Source: How Countries Supervise their Banks, Insurers and Securities Markets 2007:Central Bank Publications.

Domestic changes proposed1.US:

the Fed as systemic risk overseer,

mergers of banking regulators, a newconsumer protection agency

2.UK:

some of the FSA to be folded back into the

Bank of England, a new consumer protectionregulator, and perhaps a new market regulator

3.Germany:

banking supervision to be moved

from Bafin to the Bundesbank

Is Financial Regulation

Leading or Following the

Markets?

T