Bilateral Regulatory Cooperation

Building Dialogues for Growth and Jobs

The focus of this paper is on bilateral cross-border regulatory cooperation. Effective regulatory cooperation between rule-makers in different jurisdictions is vital to the prosperity of the global economy. Regulation is important to achieving society’s goals with regards to transparency, fair and efficient markets and financial stability; however, finance that transcends national boundaries is equally crucial to driving growth of trade, investment, jobs and incomes. It is therefore imperative that regulators work with counterparts in other jurisdictions to ensure that regulations are compatible, and can co-exist, with healthy cross-border capital markets.

 

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Executive Summary

Effective regulatory cooperation between rule-makers in different jurisdictions is vital to the prosperity of the global economy. Regulation is important to achieving society’s goals with regards to transparency, fair and efficient markets and financial stability; however, finance that transcends national boundaries is equally crucial to driving growth of trade, investment, jobs and incomes. It is therefore imperative that regulators work with counterparts in other jurisdictions to ensure that regulations are compatible, and can co-exist, with healthy cross-border capital markets.

The coming year presents an excellent opportunity to seriously explore a new model of bilateral regulatory cooperation as the United States and other jurisdictions examine and redefine their trade and investment relationships.1 Previously, the financial services industry has highlighted the advantages that could stem from including the specifications for regulatory cooperation inside the text of formal trade and investment agreements.2 But while that would have clear merit in terms of the commitment and credibility it would impart to bilateral regulatory cooperation, policymakers have in the past expressed concern with going down such a route. It therefore makes sense to explore alternative ways to strengthen regulatory cooperation. While there do exist several ad-hoc regulatory fora between two or more countries, these existing fora can be improved upon. That is not to say that these processes have not already absorbed certain improvements and sometimes yielded positive results and worthwhile durable outcomes. But when they do, getting there is often much more fraught and time-consuming than it needs to be, resulting in unnecessary business uncertainty. The time has, therefore, come for economies to make new commitments to bilateral regulatory cooperation by establishing new mechanisms characterized by several key parameters essential for effective coordination and economic growth.

These include:

• Clear timetables;
• Published goals and objectives;
• Transparency;
• Meaningful consultation with industry and other stakeholders; and
• A process for follow-up.

Establishing mechanisms that meet these criteria would not require changes in law. Instead, SIFMA suggests other means, such as robust Memorandum of Understandings for example, could be used instead to deliver material improvements to regulatory cooperation with the option of using trade agreements in the future. But immediate, practicable improvements do require sincere commitment from policymakers and regulators allied with consultation and constructive input from the broader public.