Risk Management

10:00 AM
David Craig
David Craig
Connect Directly

The Conversation: Connecting the Global Regulatory Agenda

US and European regulatory practices have diverged in crucial areas such as banking oversight, derivatives regulation, and privacy protection. Reforms are moving ahead but gaps persist. Should there be more cooperation?

Craig: How important is convergence? Different territories have different histories and market structures, and so maybe some divergence is normal.

Bowles: Some divergences are normal. In general these should be small. Every territory will put itself first; there is no way to escape that. In the EU there already have to be compromises given that the EU is not one country and has itself internal differences in history and structures. However the international considerations should be kept in mind right from the start, often they can help in reaching the internal EU compromises. That is a process that is not sufficiently developed within the EU itself.

Craig: What are the areas where you think divergence can have the most damaging effect? Do you worry about arbitrage, for example in Asia?

Bowles: Transatlantic cooperation is a good thing for greater understanding but it should not be the tool of trying to shut out or dominate what happens in Asia. Long term that is unlikely to succeed. There was a time when the Asian regulators seemed to play ‘wait and see’ in some areas, now I think they are moving to wanting greater involvement. Of course there are things that we can learn from other jurisdictions too.

Craig: In terms of the global agenda, what are the remaining gaps that need tackling? Have we really addressed the TBTF problem?

Bowles: Too big to fail is still not fully tackled, nor indeed fully understood. The nature of TBTF may vary country to country. Within the Eurozone there is still a lot to learn about the interconnection of banks and sovereigns and how to address the lack of flexibility that monetary union creates. Absence of the ability to depreciate the currency may mean that there are limits to the size of banking sector that can be absorbed in the event of crisis. Others are also wondering whether to some extent this applies to the Eurozone as a whole, that it is impossible to absorb a systemic banking crisis if there is not the ability to use the full range of monetary tools that inevitably lead to devaluations. We all hope that the agreed rules on bail-in resolve many of these problems, and in the limited way in which this has already been tested in the EU there are reasons to be optimistic.

Craig: In terms of the EU, your ECON chairmanship has seen a huge change, both in the development of a banking union and in delivering key regulatory reforms such as Basle III (CRD 4), derivatives (EMIR), hedge funds, credit rating agencies and market abuse. What are the remaining challenges for your successor?

Bowles: The focus in the next five years may well turn much more towards growth and how to promote that. This puts fund management in focus and of course that has already started with the consideration of whether there are TBTF issues there. Undoubtedly there will be fallout from some of the vast amount of regulation that has already been done, sometimes in haste, and there are massive amounts of rules, our so-called level 2 measures, that have yet to be completed and go through scrutiny procedures. Alongside that there will be all the implementation of banking union and further development of the monetary union.

Read the report: "The Danger of Divergence: Transatlantic Financial Reform & the G-20 Agenda," produced through a partnership between Thomson Reuters, the Atlantic Council, and TheCityUK, examines the sources, risks, and costs of divergence in transatlantic financial regulation and calls on the US and EU to reenergize efforts to coordinate implementation of the G-20 regulatory agenda.

David Craig is President, Financial and Risk, at Thomson Reuters Corp. David joined the company in 2007, serving first as Chief Strategy Officer. He subsequently became founder and President of its Governance, Risk, and Compliance business. Previously, he was with McKinsey & ... View Full Bio
2 of 2
Comment  | 
Print  | 
More Insights
Newest First  |  Oldest First  |  Threaded View
User Rank: Author
5/23/2014 | 12:22:04 PM
Small vs. Big institutions
I'm happy that you mentioend that issue of proportionality. It's a big issue here in the states where we have such a big community banking sector that struggles to match the same compliance requirements that big banks have to deal with. I think it's interesting that some industry associations are helping community banks to pool resources to help with compliance. I expect that trend will continue to grow as there isn't enough consideration in regulations today around the size of institutions.
More Commentary
A Wild Ride Comes to an End
Covering the financial services technology space for the past 15 years has been a thrilling ride with many ups as downs.
The End of an Era: Farewell to an Icon
After more than two decades of writing for Wall Street & Technology, I am leaving the media brand. It's time to reflect on our mutual history and the road ahead.
Beyond Bitcoin: Why Counterparty Has Won Support From Overstock's Chairman
The combined excitement over the currency and the Blockchain has kept the market capitalization above $4 billion for more than a year. This has attracted both imitators and innovators.
Asset Managers Set Sights on Defragmenting Back-Office Data
Defragmenting back-office data and technology will be a top focus for asset managers in 2015.
4 Mobile Security Predictions for 2015
As we look ahead, mobility is the perfect breeding ground for attacks in 2015.
Register for Wall Street & Technology Newsletters
White Papers
Current Issue
Wall Street & Technology - Elite 8, October 2014
The in-depth profiles of this year's Elite 8 honorees focus on leadership, talent recruitment, big data, analytics, mobile, and more.
Inside Abel Noser's Trading Floor
Inside Abel Noser's Trading Floor
Advanced Trading takes you on an exclusive tour of Abel Noser's New York trading floor, where the agency broker known for transaction cost analysis, is customizing algorithms for the buy side, while growing its fixed income trading and transitions business.