The umbrella group of global securities regulators has its hands full with the long list of ongoing reforms in response to the financial crisis, but its role is expected to expand as global capital markets evolve, notes Ian Russell, president and CEO of the Investment Industry Association of Canada (IIAC).
In his latest letter to IIAC members, Russell details the packed reform agenda that the International Organization of Securities Commissions (IOSCO) already faces, and a vision for the future recently set out by its secretary-general, David Wright, at an industry conference in Turkey.
Russell notes that IOSCO’s current priority is fulfilling its commitments to the G20, which were made in the wake of the crisis, including: developing an effective resolution mechanism to enable failed firms to undergo an orderly windup; derivative market reforms; building a regulatory framework for the shadow banking system; developing appropriate capital and liquidity standards for securities firms; and, implementing corporate governance standards.
Some of these initiatives are more complicated that other, he notes, citing Wright. Creating resolution plans for failing firms, for example, will depend on strong coordination among regulators in different jurisdictions. “Another challenging area is the complexity of the shadow banking system, requiring a multi-faceted regulatory approach,” he says.
And, while the structural reforms for the OTC derivatives market may be relatively straightforward, coordinating implementation and minimizing extraterritorial regulation is a significant challenge.
For IOSCO, these challenges are underlined by the fact that it has no real power to force agreement and cooperation among regulators from different jurisdictions — it must rely on peer pressure.
Nevertheless, Russell reports that Wright sees a bigger role for IOSCO as the capital markets evolve in the years ahead. He says Wright foresees a proliferation of regional capital markets developing in the emerging countries over the next 10 to 15 years, and imagines that, “IOSCO will have an important role encouraging this market expansion through education and technical assistance.”
“Both in solving problems from the past and bringing to life a vision for the future, the IOSCO secretary-general is addressing issues that are important to Canada’s investment industry,” Russell concludes.