In the policy paper, entitled The Future of Financial Regulation - An Update, ACCA calls for changes, including better ethics training for all directors including non-executive directors, the implementation of a US-style Consumer Financial Protection Agency in Europe and the urgent need for company boards to upgrade their risk functions.
'We need to see specific proposals to turn the G20's stated pledge to see integrity in financial institutions turn into reality,' said Ian Welch, ACCA's head of policy and co-author of the report. 'The way to do this is for both businesses and regulators to agree on ways to instil and implement ethical business codes in our financial and corporate sectors.
'Buy-in from both sides is the key to achieving successful regulation. The risk is that if this is not achieved, governments could lose patience and impose a framework of strict and detailed regulations rather aiming for than a balanced and common sense business environment.'
The paper argues that much remains to be done to ensure non-executive directors exercise meaningful and effective oversight of actions of executives in large complex banks. They particularly need help in obtaining assurance that agreed board policies have actually been implemented by management.
The discussion paper also discusses the principles needed for solid financial regulation in the future. It examines:
- the purpose and structure of regulation
- competition
- standards of conduct and competence
- governance
- accountability and incentives
- risk management and capital funding.
'It is still too early to give a definitive view of the regulatory landscape as proposals are still being consulted on at national and global levels,' said John Davies, ACCA's head of business law and co-author of the report. 'The debate will go on way into 2010. But some of the key points made by ACCA have been followed, notably on the welcome maintenance of national supervision as the bedrock of regulation.
'Speculation during the past year about the introduction of some sort of "super-regulator" has remained, mercifully, just that. The connection between regulator and regulated must be maintained, which is why we also have concerns about the proposed pan-EU regulatory architecture - co-ordination and best practice sharing is good, but remoteness is not.'
Welch added: 'We are concerned at a continued lack of action on the so-called "too big to fail" institutions - the existence of which is an anathema to good regulation. Extra capital requirements and more intensive supervision will go so far, but it is disappointing that the re-introduction of a Glass-Steagall type division of investment and retail banking activities are not being taken a bit more seriously.
'Competition is the key to effective regulation and governments must put the promotion of competition at the heart of their approach.'
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