Australian Securities and Investments Commission (ASIC) chairman Greg Medcraft has emphasised a need for consistent global regulation of financial services in a speech in Ireland.
Mr Medcraft addressed the International Organization of Securities Commissions (IOSCO) in Dublin last week and said consistency in regulation helps support freer flow of capital across borders and hence economic growth - as well as making for more effective regulation.
"Consistency, by definition, reduces the arbitrage risks which threaten our three strategic goals - confident and informed investors, fair and efficient markets and a reduction of systemic risk," Mr Medcraft said.
"Consistency addresses the risk of a 'race to the bottom'."
However, achieving consistency has been complicated by the increasing number of firms operating in several countries and thus facing potentially conflicting sets of laws that apply to the same activity.
Differences in timing for the introduction of new regulations have also exposed markets to periods of inconsistency, while the lack of an effective global framework has also been a problem, he said.
Mr Medcraft said global institutions are the key to addressing these challenges, and IOSCO has an important role to play in developing an authoritative "global rule book" for regulators and policy makers.
This would not be with the aim of achieving identical regulations across different markets but would make sure different regulatory bodies are on the same page, making sure rules are "sufficiently granular", supported by a detailed methodology and delivered in a timely fashion, he said.
IOSCO also needs to provide guidance on how to manage conflicts between the rules of different countries, he added.
ASIC recently agreed on a mandate to support this by developing a tool box of measures to address how regulatory regimes fit together. The idea was to support a shared understanding and also to develop guidance on how the tools might be used.
"By developing a global rule book and a tool box to overcome differences in national rules, I see IOSCO as playing an important role in promoting consistency in global regulation," Mr Medcraft said.
"By focusing on equivalent regulatory outcomes, we can avoid fragmenting our markets at a time when we are in desperate need for our markets to be providing capital to support economic recovery."
