Financial regulators need to take care to foster diversity in business models, while focusing on supervision work in the most effective areas, two senior officials of the Reserve Bank of Australia said in different speeches on Friday.
Glenn Stevens, RBA governor,
said that "in the area of financial regulation… having developed a very substantial pipeline of work since 2008, our energies need now to be devoted to careful and systematic implementation of the already agreed reforms."
"That is not to preclude new regulatory initiatives, which are still being put forward. But the implementation task arising from the pipeline of reforms already agreed, either in detail or at a conceptual level, is very large indeed."
He said the list of reforms - which includes the Basel III package, reforms for over-the-counter derivatives, oversight of shadow banking, and work to address the problem of 'too big to fail' - was a "daunting" workload.
"We need to avoid reform fatigue, and to sustain our support for those doing the hard grind of devising the new rules and making them work. To do that, we need, in my opinion, to contain the growth in the regulatory agenda, and to respond only to the most important calls for further major work streams, at least for the next little while."
Stevens emphasised that this was "not a call for current reform efforts to stop, or to be watered down. It is about ensuring we focus our finite energies and resources on the most important problems, and getting industry to do the same."
Luci Ellis, head of the RBA's financial stability department,
said that "we should also be mindful that the reforms have gone a long way to promote international consistency in financial regulation."
"For example, for the first time, the Basel Committee is assessing how faithful each country's reforms have been to the agreed Basel III framework. And there will be further work on the consistency of risk weights across banks for the same exposure. This is important and helpful work.
"But in ensuring consistency, we do not want to create a monoculture, with all members being vulnerable to the same risks because they face the same incentives.
"There is something to be said for allowing some diversity of business models, so the whole system doesn't collapse from a particular shock. That is one kind of diversity that I think needs more attention.