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Commissioned by the EU-US Coalition on Financial Regulation, the Report cites the G20 call in 2010 for vigilance “to ensure open capital markets and avoid financial protectionism”. The member Associations of the Coalition have become increasingly concerned by growing elements of regulatory extra-territoriality and protectionism in both the EU and US programmes for regulatory overhaul, which are increasingly inconsistent with this G20 call for vigilance.
The Coalition recognises that there will be differences in the overarching legal systems, market practices and regulatory priorities of the EU and the US, but are strongly of the view that there is a common foundation between their regulatory policies, objectives, standards and outcomes. These are sufficient to secure a level of regulatory inter-reliance that will help to sustain the international competitiveness of transatlantic businesses.
Importantly, such an approach will also reduce legal risk, compliance complexity, regulatory uncertainty and transactional costs that will flow from what is an increasingly fragmented regulatory approach.
The report argues that IOSCO’s 38 Objectives & Principles of Securities Regulation, which were originally produced in 1998 and updated in 2010, provide an internationally-accepted foundation of regulatory adequacy. The Coalition Associations recognise, however, that regulatory interdependence will require a greater degree of in-depth analysis and due diligence, if it is to be credible and effective. While it may be necessary to go beyond the IOSCO Principles in this way, particularly in the area of supervision and enforcement, the Coalition Associations believe that they are a credible starting point for building international regulatory accreditation.
Cecelia Calaby, Executive Director at American Bankers Association Securities Association (ABASA), said: “Mutual regulatory recognition is critical for national supervisors seeking to implement post-crisis regulatory repair within the context of national laws and market structures, while also allowing for regulatory compatibility to address the global nature of financial service businesses. This report highlights the role of mutual regulatory recognition and sets out certain features of an effective approach.”
Simon Lewis, chief executive at the Association for Financial Markets in Europe and Global Financial Markets Assocation, said: “This report highlights the central role that ‘mutual recognition’ can play in financial reform, where standards can be measured against equality of outcomes and effects, rather than by agreeing identical legal text. It is also important that domestic and international regulators assess the impact of proposed regulation by analysing the overall impact that measures will have on markets globally.“