28 January 2016

Hedgeweek: Regulation falling short

Senior executives at financial services firms are concerned that regulation in the sector is not promoting stability, according to the 2016 Global Regulatory Outlook published by Duff & Phelps.

Julian Korek, Global Head of Compliance and Regulatory Consulting at Duff & Phelps, says regulators are likely to be worried by the weight of industry opinion questioning the efficacy of regulation. He adds: “The findings may simply reflect the limitations of what regulation can achieve. There are, after all, few guarantees with financial markets. However, the depth and breadth of regulation continues to expand, with new requirements on firms and new areas brought within regulators’ remits.” 

Monique Melis, Head of Regulatory Consulting at Duff & Phelps, says that global coordination is unlikely to be resolved in the foreseeable future and this will remain a challenge for firms. She says: “Even with transatlantic regulation outlining identical requirements, cultural differences between regulators and their enforcement regimes on each side would challenge any globally standardized approach.” She adds, though, that meaningful harmonisation and improvements in the industry’s standards have been achieved, with regulatory arbitrage decreasing: “Relocations prompted purely by a desire to escape remain rare. You can run but you can’t hide, as the adage has it.” But while regulators’ inconsistency comes under scrutiny by survey respondents, this is not a failing to which financial services firms themselves are immune.

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