Ten years on, it is time to take stock, evaluate the progress thus far and identify areas where more work is needed. With national efforts to implement new global standards now in full swing, this year’s Discussion Paper of the Swiss Finance Council seeks to contribute to this debate. The central question this Discussion Paper analyses in greater detail is “Are we seeing a retreat from international regulatory cooperation, and do we run a risk of regulatory fragmentation along national borders?”
Let there be no doubt: the post-crisis international consensus on financial regulation was crucial to increasing financial stability on a global scale, and the global standard-setters are to be commended on the progress achieved. At the same time, we are today witnessing growing tendencies in some jurisdictions to question the role and legitimacy of international financial standard-setters and to contemplate a departure from supranational policy-making and coordination more generally. Alternatives are hoped to be found in a retreat to protectionism and national rule-making, thus de facto looking for national solutions to what ultimately and increasingly are global problems. Such instances of inconsistent implementation of the agreed global standards raise important level-playing field concerns for the financial services industry. Absent a credible coordination mechanism, the obvious risk is that of a regulatory race to the bottom, which would not be conducive to financial stability or to fostering sustainable business models for the industry.
We believe that a key ingredient to changing the course of the aforementioned dynamics, is a concerted effort by national and supranational regulatory, supervisory and standard-setting authorities to restore trust in one another. At the same time, we should not lose sight of the intrinsically global dimension of today's financial services and markets landscape. Strengthened governance in global standard-setting, stricter enforcement mechanisms as part of the implementation process, as well as deeper international cooperation are all key to achieving internationally consistent implementation of agreed reforms and to addressing potential deficiencies or undue deviations. Successful global regulation and supervision must focus on delivering enhanced regulatory coherence and convergence, based on internationally agreed principles and standards, in order to sustain global financial stability.
Based on the Discussion Paper’s case studies, as well as contributions from industry experts and distinguished members of the global regulatory community, our publication proposes three sets of recommendations that could serve as building blocks for a more efficient international regulatory cooperation framework. We trust that you will find it a thought-provoking contribution to this important debate.
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