Securities regulators have an increasingly important role to play in maintaining financial stability at a global level, says Howard Davies, chairman of the Financial Services Authority. He made the comment today at the Annual Conference of the International Organisation of Securities Commissions in Stockholm.

Davies called on securities regulators to give greater emphasis to financial stability issues, given the potential for contagion between one sector and another. He also called for more effort to achieve more consistency in banking, securities and insurance regulation internationally.

“There is no doubt that we need still to keep a particularly sharp eye on the health of our banking market. But it has become clearer than ever over the last four years that threats to financial stability may arise elsewhere too, whether in developments in securities markets or perhaps imbalances and shocks in the insurance industry.”

Davies said that greater emphasis on financial stability issues is beginning to be identifiable among securities regulators. But he added, “There are those who would still maintain that a securities regulator should focus attention only on the quality of information provided in the marketplace by market participants, and should not consider the impact of collapses in securities firms, indeed should positively resist being dragged into prudential concerns. That is not my view, and I think it is evident that securities regulators are, whether they like it or not, being pushed into a broader role. For my part, I would not want to resist this pressure, since I see no inconsistency between consumer protection, in the conduct of business sense, and the maintenance of financial stability through the promotion of orderly markets.”

He concluded, “All this means that the days when IOSCO could work in isolation are over. We need always to keep an eye open for the interactions between our work and that of other international bodies and groupings of regulators. We need to organize ourselves to make a more effective contribution to the work of the International Financial Institutions and the Financial Stability Forum. And we need constantly to think about the way in which our work can contribute to financial stability worldwide.”