A new report from the Financial Stability Board (FSB) indicates that it hasn’t uncovered any evidence to suggest that that the major regulatory reforms that have been adopted since the financial crisis have adversely affected the provision of long-term finance.
The FSB notes that the major global reforms — such as the new capital regime for banks (Basel III), over-the-counter (OTC) derivatives market reforms, and the new regulatory and accounting framework for different types of institutional investors — which were enacted in response to the financial crisis, have not had the impact that some feared. Back in February 2013, the FSB provided an initial report to the G20 finance ministers and central bank governors suggested that these sorts of reforms could affect long-term investment finance.
So far though, it hasn’t seen any concrete evidence of that. Still, it notes that it’s still early days for many of these initiatives.”With most regulatory reforms still at an early stage of implementation, it remains too early to fully assess their impact on the provision of long-term finance or changes in market behaviour in response to these reforms,” the FSB says. It says that both regulators and the industry stress that these reforms need to be fully implemented “in order to reduce uncertainty in the market and achieve the intended effects.”
The FSB does say that its monitoring efforts highlight “a shortage of consistent data on long-term investment finance for analysing the impact of regulatory reforms”. And, it says that this argues in favour of a project to develop standardized definitions for quantitative indicators of long-term investment finance, that could be collected and compared across countries.
In the meantime, the FSB says that it will continue to monitor the impact of reforms, including possible regulatory impediments to the promotion of market-based financing, the development of new instruments to finance long-term investment, or impacts on the supply of long-term financing. The reforms are intended to be proportionate to risks, and to support financial stability, the FSB says; adding that they are not designed to encourage or discourage particular types of finance.