Some of the most significant pieces of regulation for financial services have been implemented in the past ten years (e.g. EMIR, MiFID I & II, Dodd Frank etc.), primarily as a result of the post-crisis G20 mandate. Do you feel the market infrastructure regulatory landscape will experience more major shifts in the coming years, or has the pace of change settled down for the foreseeable future?
Compared with the post-crisis G20 mandate, the pace of change has moderated. Clearly there is work still to be done to complete all the aspects of the mandate but from a regulatory perspective the roadmap is quite clear. This doesn’t mean that the regulatory agenda will go quiet, however, as there is a range of emerging and established issues that require regulatory attention.
Important structural developments, such as LIBOR transition, will provide a focus for activity over coming years and it is largely in industry’s court to take forward. The transition will involve a significant amount of work to revise contracts, update systems and ensure appropriate communication to counterparties. Regulators have been at pains to emphasise that all entities which have exposure to LIBOR should be acting now to assess the extent of their use and to take timely action to plan when it creases to be available.
There is also a significant focus on coordination among jurisdictions to address fragmentation issues that may have arisen and a considerable amount of work has been undertaken by authorities and regulators to address these issues. The reports last year from FSB and IOSCO indicate a concrete approach and next steps to be undertaken. The use of deference and associated tools are important mechanisms to provides clarity on expectations to participants operating across a range of jurisdictions and regulators remain keen to explore innovative ways to work at a multilateral level.
What approach is your organisation taking to emerging technology and digital assets?
The development of new assets, products and services have the potential to offer significant benefits to market participants but are creating challenges to traditional firms’ business models. As a regulator, we are technology neutral but remain mindful of its potential to impact the risk profile. We support technological change that will improve outcomes across the financial system, while maintaining the fundamental principles of our regulation of financial services and markets.
Looking forward a significant challenge will be how FMI providers respond to the rapidly changing structural and technological landscape, including artificial intelligence, machine learning, text analytics, voice analytics, and other technologies. For example, the Australian Securities Exchange is currently in the process of developing a new Distributed-ledger-technology-based clearing and settlement system. At the same time, cybersecurity, especially data integrity and protection, are crucial for consumer trust, and I expect it will continue to be an important technology-related focus for regulators.
ASIC participates in a range of international and domestic innovation initiatives, for example we have been part of the Global Financial Innovation Network from its inception in 2018. The GFIN is committed to supporting financial innovation by creating a framework for cooperation between regulators to share experiences and approaches to innovation.
Technology also enables the creation of enhanced regulatory tools and interfaces. We consider that regulatory technology (regtech) has enormous potential to help businesses build a culture of compliance, identify learning opportunities, and make efficient use of resources relating to regulatory matters.
Entering a new decade is not just about looking ahead; it’s also a good time for reflecting on the past. What’s the most important lesson you’ve learned from the past ten years?
One of the most important factors when seeking to address emerging issues and risks is understanding extensive level of interlinkages and cross-sectoral connectivity, which may be quite opaque at times. From this a key lesson is the fundamental importance of ensuring an effective framework and toolkit for cooperation between authorities.
ASIC participates in a range of regulatory forums domestically, regionally within Asia Pacific and globally across a range of sectors. It is a signatory to range of international cooperation agreements including the IOSCO Multilateral Memorandum of Understanding and numerous bilateral memoranda of understanding.
More recently we have been increasingly participating in international and domestic supervisory colleges to inform our supervisory approaches for major banking and financial groups. Supervisory colleges facilitate deeper dialogue and cooperation between regulators to enhance supervision of cross‑border financial entities, provide greater visibility of interdependencies, and help manage financial and non‑financial risks.
I anticipate we will see a significant push to encourage and support these types of networks over coming years.