16 August 2012

ザルツブルグ・グローバル・セミナーで、規制当局間の国際協力はかつてないほど困難だが、その必要性もまた最も高まっていると発言したドイツ連邦銀行のドムブレット理事

Financial sector reform – time to slow down?

The regulatory community is currently facing enormous pressures. The sovereign debt crisis has given a fresh impetus to calls to water down or delay regulatory reform. Some argue that the ongoing uncertainty in financial markets and the weak global economy are good reasons to ease up on regulatory pressure. They say the financial sector is being asked to do too much too soon, and regulators should slow the speed of adjustment.

Yet I see it as more a case of “too little, too late”: If there is a reproach to be made, it is that regulatory progress has not been faster. The sovereign debt crisis, which is not least driven by systemic problems in some countries’ banking systems, underscores the urgent need to make the financial system more resilient. Relying on financial markets’ self-regulation will not do, I am afraid. We must deliver on our promise and extend regulation and oversight to all systemically important financial institutions, instruments and markets.

To deliver this promise, close international collaboration is essential. Given the truly global financial system, “going it alone” is no longer a viable option. It will only lead to the migration of business and to regulatory arbitrage, undermining not only the integrity, efficiency and orderly functioning of financial markets, but ultimately undermining financial stability.

International consistency versus one-size-fits-all

The crisis has clearly demonstrated that countries cannot successfully regulate their financial markets and firms in isolation. Capital flows do not stop at geographical borders; quite a number of financial institutions operate globally. Therefore, an internationally coordinated regulatory response is imperative. To be successful, reforms must be implemented at least at the major financial centres.

International cooperation is not an end in itself, however. Instead, I suggest to measure its value by the extent to which it provides financial stability. While adopting a robust, common set of rules is essential, it is neither practical nor desirable to fine-tune all details of financial regulation internationally. As the characteristics of each country’s financial system differ, sometimes significantly, I do not think it to be appropriate to apply completely identical rules to every country or region. We must strike the right balance between providing a workable level playing field and at the same time providing sufficient flexibility for the peculiarities of national financial systems. The leitmotif for financial regulation ought to be international consistency, not one-size-fits-all.

A uniform set of rules and regulations would deprive us of the benefits of international regulatory competition. By this, I do not mean competition where countries are undercutting each other with ever laxer, but also ever more risky regulation. This would be equivalent to a race to the bottom as we would invite market players to arbitrage across divergent national regimes.

By regulatory competition, I mean assessing the merits of regulatory approaches and measures undertaken by other countries and, if deemed appropriate, adopting these approaches and measures. In short – learning from one another. For instance, in the USA, the Federal Deposit Insurance Corporation, FDIC for short, has gained an extensive wealth of experience in resolving failing financial institutions. In my opinion it would be careless for European authorities not to draw on the knowledge of their US colleagues when implementing their own resolution regimes.

Need for international cooperation

The work to develop a new regulatory framework for the international financial system is slowly but surely nearing completion. An example of what has been achieved through intensive cooperation is the new regulatory standard for bank capital and liquidity, commonly known as “Basel III”, or the comprehensive policy framework for dealing with systemically important financial institutions, SIFIs for short.

Yet, we can not at all be satisfied with what has been achieved. While rule-making at the global level is a necessary condition for financial stability, it is by no means a sufficient condition. Rather, for the agreed reforms to be effective, they have to be translated into national laws and regulations. This must be done in a globally consistent manner and according to agreed timelines. Here, we must significantly step up our efforts and cooperate as closely as possible. Otherwise, we risk failing.

Intensified implementation monitoring

The success of financial sector reform crucially depends on the timely and globally consistent implementation of agreed policies. As major reforms to address risks and strengthen regulation across the financial system have been adopted, it is becoming increasingly important to ensure that countries live up to their commitments. By means of peer pressure and transparency, we have to make sure that the measures necessary to improve the stability of the financial system are actually put into practice.

A number of steps to ensure effective and timely implementation of internationally agreed reforms have already been taken. The results of numerous monitoring exercises are summarised by the FSB in regular scoreboards and public progress reports to the G20. In order to enhance the effectiveness of implementation monitoring, the FSB and important standard-setting bodies have jointly established a Coordination Framework for Implementation Monitoring. In addition, the FSB monitors the implementation and effectiveness of international financial standards and policies via its peer review programme. Peer reviews are an important tool to promote consistency, enabling FSB members to engage in dialogue with peers and share lessons and experiences. It is necessary to continue on this path.

To summarise:

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