The International Organization of Securities Commissions (IOSCO) has published a Consultation Report which sets out a comparison and analysis of prudential standards in the securities sector. The Consultation Report follows a report from the Joint Forum which reviewed the differentiated nature and scope of financial regulation raising concerns about the lack of a uniform global standard for capital adequacy in the securities sector.
The analysis in the Consultation Report focuses on the net capital rule (NCR) approach and the CRD IV Directive, the foundations of which are found in Basel III. It takes into account national variations and identifies key themes, including regulatory scope, risk capture, components of capital, use of internal models and risks posed by group entities.
The Consultation Report highlights prudential regulatory and supervisory areas that might be considered in a future updating of the IOSCO 1989 Capital adequacy standards for securities firms report, in particular to:
- identify opportunities for regulatory capital arbitrage that might (or have already) result from differences in prudential regulations across jurisdictions; and
- account for the increasing use of internal models and the corresponding increase in infrastructure, systems and controls that are necessary to ensure firms are appropriately capitalised.
IOSCO also questions whether the report:
- covers all of the key issues on prudential standards in the securities sector;
- identifies and analyses the main similarities, differences and gaps between the different prudential frameworks; and
- requires any areas of the 1989 capital adequacy report to be updated or amended.
The deadline for comments on the Consultation Report is 10 June 2014.
View A comparison and analysis of prudential standards in the securities sector, 10 March 2014
View Capital adequacy standards for securities firms, 1 October 1989