Ravi Menon: Financial regulation - the way forward Speech by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the Official Monetary and Financial Institutions Forum (OMFIF) City Lecture, Washington DC, 20 April 2017. * * * Lord Meghnad Desai, Chairman of the OMFIF Advisory Board, Mr David Marsh, Managing Director, OMFIF, Ladies and gentlemen, good morning. I am grateful to OMFIF for organising this City Lecture and giving me the opportunity to share my thoughts with you. The world experienced nine years ago a most devastating financial crisis. In response, we saw the implementation of perhaps the most wide-ranging reforms in financial regulation ever in history. We are now at an inflection point. The phase of active rule-making is drawing to a close. Where do we go from here? The 19th century Danish philosopher Søren Kierkegaard once said: “Life must be understood backwards, but it must be lived forward.” In the spirit of Kierkegaard, I see two key priorities in the next phase of financial regulation: First, to take stock of the reforms to-date – evaluate their effects, consolidate what we need to preserve, and fine-tune what we need to improve. Second, to position regulation for the technological changes sweeping the financial industry – harness the opportunities they present while managing their risks. Taking stock of post-crisis regulatory reforms Reaffirming the rationale In taking stock of the reforms, let us begin with why we embarked on them.
Out of this came the three European Supervisory Authorities (ESAs), namely the European Banking Authority (EBA) in London, the European Insurance and Occupational Pensions Authority (EIOPA) in Frankfurt and the European Securities and Markets Authority (ESMA) in Paris. We discussed whether these three authorities could be merged into one, but that was considered premature. Suggesting such a merger might have delayed the whole political process (Figure 5). Trying to move the three to the same city was considered equally impossible. Figure 5 The EU’s new supervisory structure European Banking Authority (EBA) European Systemic Risk Board (ESRB)  European Securities and Markets Authority (ESMA) European Insurance and Occupational Pensions Authority (EIOPA)  The second pillar was the European Systemic Risk Board, the ESRB. The main idea with the ESRB was to look beyond the supervision of individual institutions and focus on the risks relevant to the financial system as a whole. There was a widespread feeling that supervisors in many countries could not see the wood for the trees – and certainly not any woods in any other countries. So the new body should work with issues systemic to parts or to the whole of Europe. As time has passed, this task has become known as “macro-prudential supervision”. The institutional set-up of the ESRB Legally, the ESRB is an independent EU body located in Frankfurt and with a Secretariat provided by the European Central Bank. The President of the ECB is also the Chair of the ESRB. The ESRB has no binding powers.