Assessing Financial Regulatory Coordination and Integration with Reference to OTC Derivatives Regulation

This paper explores important issues relating to regulatory coordination and integration in the international financial system. Coordination in a regulatory context refers to coordination between regulators in different jurisdictions to achieve desired regulatory outcomes, including effective supervision and enforcement over regulated entities, particularly those that operate on a cross-border basis. Integration refers to the process by which certain parts or aspects of one regulatory system are recognised by, or incorporated into, another regulatory system to produce a single, integral system that operates on a cross-border basis. Examples of integration range from the recognition by a regulator in one jurisdiction of a determination by the regulator in another jurisdiction for its own regulatory purpose to the adoption of a common set of rules for the purpose of regulating a certain area of activity. The paper considers the benefits of and challenges to regional coordination and integration, the potential principles and mechanisms that might be used to motivate and structure regional coordination and integration, and suggests a systematic set of criteria to evaluate which mechanism might be the most appropriate in any given context. The paper explores these issues with reference to the regulation of OTC derivatives trading and OTC derivatives markets