Is IOSCO asleep at the wheel? That appears to be the implication of its current Secretary General David Wright. In a recent interview in Hong Kong, given to Reuters, the leader of the International Organization of Securities Commission rang a Fintech warning bell that his group was a bit to somnolent in its aknowledgement that finance is changing – and rather rapidly.
“It’s a very challenging time for securities regulators: models and markets and structures are changing very fast and you’ve got to be very conscious of that and up to speed.”
“Regulators first have to understand and be right at the frontier of thinking in terms of how these technologies are developing and, even more difficult, to work out the regulatory implications of this technology”
“I think regulators have got to wake up quickly. We need as IOSCO to get up to speed, very, very quickly.”
IOSCO describes itself as a “key global reference point” for financial services and markets regulation. Membership represents 95% of the world’s securities markets. The board itself is made up of 34 securities regulators (including the US and UK). IOSCO is a bit like the UN of securities markets. Lots of participation and ideas but little enforcement capabilities.
Wright, who retires in March, was directing his fire at peer-to-peer (marketplace) lending, cryptocurrencies, and other areas of the Fintech “revolution”.
He is absolutely correct that IOSCO needs to be up to speed on the revolution occuring in finance today. As for more regulations? Tread with caution.
Even former Secretary of the Treasury Lawrence Summers states;
“Regulators should allow new firms to operate, generate data on the outcomes created by novel business models before writing new rules.” Summers believes traditional finance “has let us down”.
It is always easier to write a rule than to take one away. Regulators too frequently are on a mission to create rules without fully understanding the impact, and associated cost, to society.