The WFE has published a statement entitled ‘Financial Stability through International Regulatory Coherence’ which discusses cross-border fragmentation arising from unjustified dissonance between jurisdictions’ financial services regimes. The statement can be summarised as follows:
- International regulatory fragmentation adds costs, slows innovation, impedes competition, and reduces choice and risk diversification for investors. It may also lessen the resilience of financial markets as a whole, by reducing the scope for risk diversification.
- It is right that jurisdictions manage risks through rules tailored to their local financial system; however, the means of doing this tailoring should be consistent with agreed global frameworks.
- Cross-border regulatory co-ordination and deference to comparable standards improves supervision and reduces systemic risk.
- Crypto assets are an area that would benefit from forward-looking international regulatory standards, to promote investor protection and reduce the possibility of regulatory arbitrage.