There remain bid differences in international regulatory frameworks that must be harmonized, according to a new coalition of international business organizations. This is despite some success in coordinating central clearing in the US and Europe.
Commodity Futures Trading Commission Chairman Timothy Massad today alluded to this one success in remarks at a Global Exchange and Brokerage Conference in New York. He noted that he has discussed the necessity of resolving rule differences with European regulators regarding their recognition of clearinghouses in the US. “Today, that is done,” he said, referring to an agreement reached in February 2016 that ensures European central clearing parties will be able to do business in the US more easily and that US CCPs can continue to do business with EU companies.
Still, other differences remain, said the Transatlantic Financial Regulatory Coherence Coalition, which aims to create a “barrier-free transatlantic market” and describes itself as a “cross-sectoral business association representing global companies headquartered in the US and EU.” The coalition wrote an open letter stating that in order for the Transatlantic Trade and Investment Partnership or TTIP to be a success, harmonization is a must.
“The most pressing impediments to cross-border finance between EU and US capital markets are the result of insufficient regulatory cooperation,” the coalition stated. “These are what can be most usefully addressed in TTIP and where the full potential value in financial services can be unlocked.”
The group cited several instances where differences remain, including:
Poor synchronization in the implementation of Basel III;
Differences over bank structure and geographic requirements for capital;
Bank resolution planning divergences;
Important inconsistencies in over-the-counter (OTC) derivatives regulation;
Divergent regulatory regimes for non-bank investment firms.
The coalition several prescriptions for how policy making can converge, including in making regulation part of discussions “at an early stage in the policymaking process,” focusing solely “on future policymaking and regulatory development” and making sure there is a focus on transparency and accountability.
“The potential benefits from meaningful improvements in transatlantic regulatory cooperation are significant,” the coalition stated in its note, adding that a “strengthened regulatory cooperation, coordination and coherence” between markets can help TTIP in its goal of boosting growth and job opportunities.