The International Organisation of Securities Commissions (IOSCO), Europe, Brexit, and Rethinking Cross-border Regulation: A Call for a World Finance Organisation

Abstract

The need to promote cross-border regulation and cooperation between supervisors of financial markets has become acute ten years after the 2008 global financial crisis. This is due to a rise in extra-territorial legislation and cross-border access to foreign markets conditioned on “equivalence” and “deference” among jurisdictions. Brexit has made the issue more critical in Europe because the United Kingdom will rely on “equivalence” decisions on many aspects of its future cross-border financial relationships with the European Union. Equivalence decisions by the European Commission are based on a technical assessment but also include a political dimension which can punish or reward the other party. It is not just a European issue since the financial world will be more connected in the next twenty years and will need to rely even more on cross-border cooperation and equivalence. In addition, the amount of bilateral equivalence assessments and decisions could very quickly become unmanageable with dozens of jurisdictions dealing with hundreds of various regimes. The global financial architecture needs to be adapted, market fragmentation to be pre-empted, and international standards to become more granular. The International Organisation of Securities Commission (IOSCO), made up of all securities supervisors in the world, should play a leading role in cross-border regulation and deference. It is the interest of many Europeans countries, and not just the European Union, to be the driving force to strengthen IOSCO so that a more rule-based and cooperative system can prevail and prevent future market fragmentation. For this goal to be achieved, IOSCO should become a new treaty-based World Finance Organisation.