Regulators push back at complaints of fatigue

Regulators from international standard-setting bodies pushed back at industry complaints of "regulatory fatigue" today (October 22), during a conference in London.

Bill Coen, the secretary-general of the Basel Committee on Banking Supervision, said he thought the committee had broadly achieved the right balance of regulation. "On the quantitative side, we do a tremendous amount of analysis to make sure we are fully aware of the consequences," he said.

If banks – and indeed regulators – are getting tired, it is important to remember why, Coen said. He said regulators are aware of the costs they impose, but "what has a greater cost is financial crises". He added: "Memories are short and we are already seeing in many jurisdictions waning political support."

Coen was speaking as part of a panel discussion at a conference hosted by the British Bankers' Association in London. Andrea Enria, chair of the European Banking Authority (EBA) and another panellist, gave a similar assessment.

Enria said the bulk of regulatory reforms will be completed in 2016, and at that point the EBA will shift its focus to ensuring consistency. The current situation where banks report similar portfolios but widely different risk-weighted capital "is not sustainable", he said.

The Basel Committee is similarly turning its attention to consistency, concentrating on reducing the variability of risk-weighted assets across the trading book, market risk and operational risk frameworks, with much of that work due to be published by the end of the year.

There have been complaints the rules do not mesh well, potentially having a detrimental effect in areas such as market liquidity, an issue Coen said the committee was "acutely aware of". Earlier in the day, Bank of England deputy governor Jon Cunliffe had said it was unlikely all regulations would fit perfectly, which is one of the areas the central bank will consider shortly at its 'open forum'.

Coen also dismissed concerns banks were having to deal with one regulation after another, saying the Basel Committee's plans are "telegraphed far in advance", giving banks plenty of time to prepare. Quantitative impact studies give the industry "a clear view of where things are going," he said.

David Wright, secretary general of the International Organization of Securities Commissions, agreed the "regulatory juggernaut" is slowing. But he noted there were always new issues springing up. Cyber crime and the rapid growth of financial technology companies were starting to gain more attention, he said.

He too stressed the need to keep up momentum, particularly in the area of harmonisation. "In a world in which finance is becoming more complex and interconnected... if we have very different interpretations and implementations of our rules, then we are going to face more and more problems," he said.