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Taskforce pushes for global regulatory convergence

A cross-industry taskforce, co-ordinated by the International Federation of Accountants (IFAC), has called on the G20 to push for further convergence of regulation and standards across the world.

In a report, Regulatory Convergence in Financial Professions and Industries, the Private Sector Taskforce (PSTF) made several recommendations with the aim of facilitating economic stability in the world’s capital markets.

The taskforce said the major motivating factor for enhanced regulatory co-ordination, co-operation and convergence is “to minimise the effects of systemic risk that result from inconsistent and inadequate regulatory arrangements for globally important and increasingly interconnected industries, such as the financial sector”.

The report stresses the necessity of open communication and transparent processes, as well as continued co-operation between national and regional regulators and professional and industry groups to further develop global standards.

It warns against the dangers of unilateral decision making and advocates enhanced consultation and global co-operation on matters of regulatory reform to avoid regulatory fragmentation.

IFAC president Göran Tidström said while great strides have been made in regulatory convergence there is still more to be done and the global financial crisis highlighted this.

“IFAC supports the G20’s work to reform the international financial system and reduce informational uncertainty and risk and thus avoid future financial crises. The PSTF report encourages the G20 to maintain its current momentum towards international convergence identifies existing gaps and offers insightful recommendations. There will be no better time to progress these issues,” Tidström said.

The International Valuation Standards Council (IVSC) board of trustees chairman Michel Prada said the council supports the PSTF’s recommendations as there is an urgent need to find a more efficient approach to the valuation of all types of assets.

“The IVSC is actively engaged…in delivering a comprehensive set of international standards in order to restore confidence in the good functioning of financial markets,” Prada said.

“We are also convinced of the need for a stronger architecture of international financial regulation and enhanced cooperation between regulators and private sector organisations.”

Recommendation highlights:

  • Momentum - focus on regulatory convergence in the financial sector ensuring narrow gaps in regulatory convergence are identified. Discourage nations from making unilateral decisions and implementing unilateral national regulatory reforms that are inconsistent with international standards;
  • Consultation - enhance the breadth and depth of consultation on matters of regulatory reform, especially with groups most impacted by the reforms;
  • Standards and consistency - encourage and support the development, adoption, implementation and consistent interpretation of international standards for each of financial reporting, auditing, valuation and actuarial services;
  • Macroprudential oversight - enhance macroprudential oversight, which is supervision of the entire financial system, measures by enhancing the mandate of the Financial Stability Board and encouraging IOSCO towards convergence of capital markets regulation and oversight;
  • Strengthening regulatory organisations - support strengthening the resourcing and governance arrangements of international regulatory organisations including standard setters to enable them to achieve their objectives; and,
  • Resolution for bank-related financial institutions - establish a globally coordinated resolution regime for bank related financial institutions.

Other taskforce members included the CFA Institute, INSOL International, the Institute of International Finance, the International Accounting Standards Board, the International Actuarial Association, the International Corporate Governance Network, the International Insurance Society and the IVSC.


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