The International Organization of Securities Commissions (IOSCO) emerging markets committee (EMC) has published a consultation report titled Impact on and Responses of Emerging Markets to the Financial Crisis.
The reports conclusions come out of results from a survey of EMC jurisdictions that assessed the impact of the financial crisis on members markets and their regulatory responses.
The IOSCO offered six recommendations in its report: ensure regulatory frameworks conform to international principles; enhance capacity and review approach to regulation; promote greater inclusion of emerging market authorities on regulatory matters; ensure proper sequencing between local market development and international financial integration and liberalization; improve prudential regulation and supervision; and work closely with industry groups concerning corporate governance and risk management.
The report also suggested further undertakings by the IOSCO that would improve its role in assisting EMC members. These include assisting members to enhance their regulatory capacity, forming specific task forces to undertake thematic work, and facilitating greater information among regulators.
The current financial crisis has had a greater than expected impact on the members of the emerging markets committee, as financial shocks have been transmitted with ease through the global capital markets, Guillermo Larrain, chairman of the emerging markets committee, said. This was due, in part, to the increased integration of emerging markets into the global financial system, combined with regulatory systems that were ill-prepared to tackle increasingly sophisticated international and domestic markets operations.
He added that the survey showed evidence that the policy responses of emerging markets were similar to those of developed markets, demonstrating that the markets are converging.
However, the emerging markets had the unique case of an imposition of trading halts in securities markets. Additionally, priorities in emerging markets have shifted to improving regulatory approaches and capacities as well as a refining the application and enforcement of framework and business rules.
This crisis has presented emerging markets regulators with the opportunity to engage in a fundamental rethink on how they structure their markets, Larrain said.
He added that central to the development of these regulatory principles are propriety, integrity and transparency, which will enable these markets to withstand future economic shocks while supporting the development of emerging capital markets in a well managed and sustainable fashion.