The International Organization of Securities Commissions (IOSCO) signalled on Wednesday that it is backing away from efforts to label asset-management firms as systemically important, which would likely also bring added regulation.
IOSCO issued a statement at its annual conference in London, U.K. on Wednesday indicating that it is stepping back from efforts to determine which asset managers, or funds, should be considered systemically important and subject to additional regulation to guard against firms and funds that may be considered “too big to fail.”
IOSCO’s board of directors has concluded that “a full review of asset-management activities and products in the broader global financial context should be the immediate focus of international efforts to identify potential systemic risks and vulnerabilities.”
Moreover, IOSCO’s board believes that “this review should take precedence over further work on methodologies for the identification of systemically important asset management entities. After the review is completed, work on methodologies for the identification of such entities should be reassessed.”
The asset-management industry has been resisting regulators’ plans to identify firms and funds as systemically important following similar efforts in the banking and insurance sectors in the wake of the global financial crisis. Policy-makers have been pursuing this task in order to prevent future taxpayer bailouts of failing financial firms that are deemed too big to fail.
As a result, IOSCO’s board will consider what work it should undertake “in order to further strengthen the current global framework to address misconduct by firms and individuals in retail and wholesale markets.”
Furthermore, the organization indicated that it is adopting a new strategic direction focused on reinforcing its position as the centre of global regulatory policy that will take IOSCO through to 2020.
The latest strategy was approved on Wednesday by IOSCO’s presidents committee, which includes the chairmen of all of its members and meets once a year at the annual conference.
IOSCO’s new strategy will be implemented through 43 initiatives in six priority areas, including:
- Identifying risks in securities markets.
- Improving the international regulatory framework by developing standards and guidance.
- Monitoring the implementation of IOSCO standards.
- Helping regulators in emerging markets build regulatory capacity.
- Strengthening co-operation in the enforcement of market regulation and the supervision of markets and firms.
- Working with other standard setters in the international financial regulatory community.
“The Strategic Direction to 2020 builds on our achievements in recent years by intensifying activity across each of our programs. This is what our members are telling us they want. It will benefit all members — with a particular emphasis on members from growth and emerging markets,” said IOSCO chairman Greg Medcraft. “We continue to be proactive and forward-looking in building trust and confidence in markets that are grappling with new and emerging opportunities and risks, including those posed by digitization.”
In addition, IOSCO discussed proposals for work on retail leveraged over-the-counter (OTC) products and, among other things, discussed the progress that has been made on: dealing with the challenges of cross-border regulation; improving the governance of international audit standard setting; increasing the resilience of securities markets and market participants to cyber attacks; ensuring investor involvement in policy development; and facilitating capital raising by small businesses — including crowdfunding — while maintaining investor protection.