The post-GFC push for “harmonisation of regulatory frameworks” in the Asia-Pacific region is giving way to a more fragmented, “home-biased” approach, says Deloitte.
Following a “decade of intense rulemaking”, Asia-Pacific financial regulators are “tired of making new rules” and are moving towards a less co-ordinated approach to regulation, according to Deloitte’s latest Asia-Pacific Regulatory Outlook report prepared by the firm’s Centre for Regulatory Strategy.
“Brexit, the US administration’s review of global standards and domestic financial regulation, and the difficulty in reaching agreement on final calibrations to Basel III” all suggest a trend towards “home-biased rulemaking”, the report said.
“The [Financial Stability Board’s] project to evaluate whether the post-crisis regulatory reforms are achieving intended outcomes and to identify material unintended consequences is a further indication that enthusiasm for global regulation, at least for new rulemaking, may be receding,” it said.
The report also pointed to further evidence of this slowdown, such as a number of implementation deadlines that had been pushed back by Australia, Japan, Hong Kong and Singapore.
But despite this, Asia-Pacific governments and regulators have continued to express support for the integration of regulation, it said, quoting comments from a speech APRA chairman Wayne Byres made in June 2017.
“At a time when parts of the world seem to be moving away from a predilection for international co-ordination and co-operation towards a more fragmented approach driven by increasing nationalism and protectionism, it is worth reminding ourselves why something as basic as international standards are a good thing,” Mr Byres had said.
Referring to the global financial crisis, he pointed out that the potential for problems in one part of the world to “infect others” meant “collective action was needed”.
“To put it more simply, a highly connected system is only as strong as its weakest link, so to strengthen the system it is necessary to lift standards across the board,” Mr Byres said.
The report signalled “piecemeal adoption” of global standards would create an “uneven playing field for firms operating in different parts of the globe and puts limits on market access and growth for others”.
“It may also weaken resolve around other areas of emerging supranational regulation, for example, global insurance capital standards and in relation to asset management,” it said.
Though regional and global regulation looked to be slowing down, it would not mean “a major deregulatory push in Asia-Pacific”, according to the report.
“We see a slowing in the pace of regulatory integration, rather than a full-scale reversal. A focus on implementation and supervision, rather than developing major new supranational rules or reforms,” it said.
“Reﬂecting on and refining rules already made, rather than their wholesale abolition.”
The report advised financial firms and institutions against responding to this uncertainty by pausing the “implementation of already agreed international standards”.
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