APAC regulators to protect emerging markets from extraterritoriality

Author: Ashley Lee | Published: 17 Jan 2013
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Regulators in Asia-Pacific have called for closer jurisdictional cooperation to protect emerging markets from onerous extraterritorial regulations, such as the G-20’s rules on OTC derivatives , the Dodd-Frank Act and Basel III.


Speaking at this week’s Asia Financial Forum in Hong Kong, Australian Securities and Investments Commission (Asic) chairman Greg Medcraft and Securities Commission Malaysia chairman Datuk Ranjit Ajit Singh said local regulators needed to more actively put forward their agendas to protect emerging markets from regulations intended for more mature markets such as the US and Europe.


Singh complained global discussions on regulatory reforms were still dominated by the US and Europe. Such an arrangement risks marginalising the Asian financial markets, he said, and could inadvertently result in regulatory fragmentation, or the creation of a tripolar global financial system.


“Such an outcome would be damaging, to say the least, and risks what is referred to as the deglobalisation of finance to regionalism and regulatory protection,” Singh said.


Medcraft noted Europeans operated as a very close bloc. To that end, he believed Asia needed to follow suit, operating as a bloc to ensure that there weren’t any inappropriate outcomes.


Singh proposed that Asian policymakers come together to provide greater analysis, research and synthesis of issues facing the region to improve collective representation.


Duplicating laws across jurisdictions does not work. Instead Medcraft, who will become chair of International Organization of Securities Commissions (Iosco) in March, advocated focusing on equivalence of outcomes rather than equivalence of regimes. He stressed that a regulators should consider objectives and outcomes rather than trying to replicate laws.


He said that at the next Iosco meeting in Sydney, he and the Securities and Futures Commission’s Ashley Alder will propose a task force to look at cross-border regulation and its impacts.


“What we’re looking at doing is establishing a toolbox of principles globally to allow jurisdictions to better recognise each other’s regimes,” he said.


The US had, for example, developed a way to deal with OTC derivatives, he said. But its exact approach may not be appropriate in other jurisdictions. However, the principles behind these regulations may be points that other jurisdictions would like to consider to achieve the same outcomes.


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