Ashley Alder, chief executive of Hong Kong’s Securities and Futures Commission (SFC), has urged Asian regulators to participate in global regulatory dialogue with a stronger voice to prevent the U.S. and the EU from imposing their rules on the region.
“If Asia does not get properly involved in the global regulatory agenda, we will find that the U.S. and European rules will be extended to us whether we like it or not,” said Alder. “The result could be an isolation of Asian markets from international finance.”
Speaking at the third annual Thomson Reuters Pan-Asian Regulatory Summit in Hong Kong on Nov. 27, Alder said that the “one size fits all” set of financial rules cannot work in Asia because it fails to take into account the diversity and different stages of development of economies in the region.
The West has voiced concerns that Asian countries will not implement reforms in order to position themselves as a more attractive region for business. Alder dispelled this notion, stressing that there is no advantage to lowering standards in Asia to attract business.
“This type of regulatory arbitrage ends in tears and scandal, and very quickly repels international investors from participating in our markets, or at the very least causes them to demand a hefty risk premium,” warned Alder.
In fact, the SFC has taken bold steps towards raising standards. Recent examples include toughening rules for IPO sponsors, increased enforcement action, and getting redress for innocent investors.
While greater participation from Asian regulators is vital, there have been instances of increased cooperation between regulatory bodies. In one notable example, regulators in Hong Kong, Australia and Singapore wrote a joint letter to the U.S.’s Commodity Futures Trading Commission (CFTC) in August asking them to review the extraterritorial reach of new rules for OTC derivatives.
“The fact that this letter came from multiple regulators had a real impact, and it undoubtedly changed the debate,” said Alder. “It was also crucial that we made clear that none of us were intent on joining a race to the bottom.”
The financial crisis in the West has been accompanied by a stark undertone of distrust in the system. This problem also exists in Asia.
“We therefore have every incentive to participate in the global agenda to put in place reforms aimed at restoring trust in the system,” said Alder. “Full participation in this global project by Asian regulators enables them to place their own financial systems on a sound footing.”
Kanishk Verghese is North Asia journalist at ALB. Follow us on Twitter: @ALB_Magazine.
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