A new report from the World Alliance of International Financial Centers (WAIFC) has urged governments and regulators to do more to coordinate their activities to support the global economic recovery from the COVID-19 pandemic.
The report, 'How international financial centers can help drive international regulatory cooperation post-COVID-19,' makes the case for why regulatory cooperation is crucial to facilitate the growth of capital.
The report explains how the necessary actions that national governments and regulators took to support domestic businesses and address the health crisis could now lead to new unintended international barriers to the free flow of capital and the operation of global financial markets.
To address these challenges, the WAIFC report outlines several principles which could guide regulatory cooperation in the years ahead to smooth the global economic recovery, improve the functioning of financial markets and unlock more capital for investment. These methods, where appropriate, include:
• Recognition: Host country regulators could recognize the home country regulator's standards as valid where both have high standards and seek the same outcomes, even if they try to achieve them in different ways. Mutual recognition between countries should be an important objective.
• Substituted compliance: Host regulators could permit foreign regulated institutions and services whose activities might bring them within the scope of the regulator's jurisdiction to show compliance with their home jurisdiction regulations as a substitute for compliance with the host country's regulations.
• Exemptive relief: Host country regulators could grant financial institutions from another country exemption from compliance with some of their regulations if the home country regulatory regime is deemed adequately similar to that of the host country on the issue in question.
• Equivalence: governments could accept one another's regulatory rules as valid on the grounds that they are equivalent to their own, i.e., substantially the same in terms of outcomes in practice, if not necessarily identical in form.
Commenting on the release of this report, Jennifer Reynolds, Chair of the WAIFC, said:
"Our members are united in calling for increased international regulatory cooperation, whether at a global, regional or bilateral level, to create more integrated global financial markets and support greater economic growth."
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