Expected Regulatory Outcomes - Summary

There has been a dramatic amount of regulatory legislation either proposed or enacted within the last three years, with the intention of at least minimising the risk of a repeat of the series of events seen in the 2007/08 on any reasonable time horizon. However, with most of these regulations not coming into full effect until 2011/12 the full outcomes are still uncertain. Nonetheless, there are certain changes and trends which can be identified: a better understanding of the different challenges faced by countries around the world (even if, as was noted in the Philosophy session, this complicates the task of harmonisation), an increased requirement for more effective board oversight, an increased understanding of the implications of new technologies in the relations between regulators and market participants, and the need for more coordination globally to avoid the risk of network and systemic failure.

A key focus will be the need for regulation to coordinate the elements of micro and macro prudential policy and supervision. One of the perceived failures in the run up to this crisis was a focus on supervision of individual institutions and not on the broader macro or systemic risk build-ups that were taking place across institutions and geographies.  A critical test for the new regulatory structures will be the degree to which they work on an ongoing basis and not just in emergencies. Indeed, cooperation and coordination on a regular basis, may go a long way to reducing the need to fight fires on an emergency basis. This panel felt that one good outcome was the encouraging improvements in communication and coordination at levels lower down the ladder, in spite of the concerns about the G20 processes at the highest level.