H. Deregulation and regulatory reform

Absent international coordination, the opportunities for destructive regulatory competition will defeat regulatory reform.

C. Institutional and regulatory reform . 7 4

Several countries have made progress in regulatory reform.

More financial regulatory reform, such as coordination of any taxes or penalties that members want to apply to risk taking banks

The US wants to resolve the global crisis by providing substantially more financial help, which Europe is refusing to commit, preferring to focus on financial regulatory reform.

Financial innovation will proceed along with regulatory arbitrage.

Policies and regulatory frameworks, as well as any regulatory reform, would follow different objectives in relation to these two segments.

The OECD has also adopted instruments dealing with competition promoting regulatory reform.

Otherwise, global financial markets will be destroyed by regulatory arbitrage.

While international cooperation on regulatory reform is difficult to achieve on a piecemeal basis, it may be attainable in a grand bargain that rearranges the entire financial order.

Moreover, Australia had a strong corporate and financial services regulatory regime.

It must be recognized that regulatory reform entails adjustment costs and necessitates regulatory capacity and institution building, technical assistance and capacity building in this regard.

Emerging Markets and Global Financial Reform

The Crooked Path of Financial Reform

Five Years of Financial Non Reform

As a result, regulatory reform must be designed in a way that minimizes short term costs.

To the extent possible, there should be cross training of financial regulatory experts, financial investigators, FIU personnel and prosecutors.

One is that financial reform is inherently complicated.

Sixth, while regulatory reform that increases the liquidity and capital ratios for financial institutions is necessary, those higher ratios should be phased in gradually to prevent a further worsening of the credit crunch.

Building independent, non partisan regulatory bodies was one of the key pillars of the 2001 2002 reform program.

Introduce media reform, e.g., internationally recognized professional journalistic standards, through regulatory practices and private engagement with media entities.

But financial reform is too technical for non specialists.

Much has already been done to advance regulatory reform, notably the recent agreement to strengthen bank capital (Basel III).

Efforts were under way in several developing countries to strengthen the financial regulatory and supervisory framework.

The reform process was often inspired by international financial institutions.

It is impractical to devise a regulatory framework that accounts for every specific financial instrument and institution.

And the problems are not solved with a financial regulatory bill entrusting more powers to those regulators.

Yet, in narratives of the financial crisis, regulatory capture is often an important part of the story.

As a result, even countries with good regulatory systems are now confronting problems in their financial sectors.

In June 2003, ASEAN 3 agreed to harmonize financial policies and standards, regulatory systems and tax treatments.

Recipient countries need to expand emerging domestic capital markets and strengthen the regulatory framework of financial systems.

The current financial crisis has made the need for reform of the international financial architecture patently clear.

The stakes in the debate over international financial reform are huge.

They have said little about how they would reform financial systems.

So, should governments step back and let financial firms reform themselves?

And, while regulatory reform is progressing, its effectiveness in addressing the weaknesses exposed by the global financial crisis will depend not only on the new rules that emerge, but also on the consistency and quality of their implementation.

In the coming years, emerging markets will most likely struggle with implementation of global financial regulatory standards, which apply mostly to more sophisticated financial markets.

US Treasury Secretary Timothy Geithner has recently advanced the broad outlines of a more conservative financial regulatory regime.

(g) Increased capacity of regulatory and supervisory authorities to develop conducive legal framework for an inclusive financial sector

This reform should be packaged with a careful evaluation of the regulatory climate for business, designed to eliminate or streamline the rules.

Countries that now have solid financial regulatory systems in place are already effectively taxing their financial firms more than, say, the US and the UK, where financial regulation is more minimal.

Obama wants to expand federal command and control regulation further (though the courts have stopped his extension of some regulatory powers). Romney vows an economically balanced approach that would reform Obama s major health care, environmental, and financial services regulations.

The second issue is reform, with the financial sector a high priority.

Moreover, there has been no major reform of the global financial architecture.