Despite rising pressure for global regulation of the banking sector, the world’s top finance officials have been unable to come up with a united solution that could pave the way for the effective regulation and good governance that would provide protection from the system failures that the interconnectivity of global markets makes Australia vulnerable to.

Against that background, we are keen to canvass your views as to what could be the first tentative steps towards developing and implementing a concept of global regulation.

We do realise that you may not have considered the implications of what global regulation could entail; however, we would appreciate your early thoughts. As the leading advocate for good governance in Australia, CSA is keen to develop and articulate some initial thoughts to how global regulation could be approached to ensure that government action is based on consultation, so we would very much appreciate your contribution.

1. Do you believe that, in light of recent events, financial markets should be regulated globally?

a) Yes 62%
b) No 38%

Comments:

I don't know if regulation will work but deregulation sure didn't!
It is a global issue that transcends international boundaries so any solution needs to be focused globally.
Just not workable, sovereign issues etc.
Yes, due to interdependency of markets.
Financial markets are subject to global funds flows risks.
It is not possible to have an independent super regulatory body to formulate or regulate the global market. The market force will correct itself.
Free markets must prevail.
Too much variation between countries.
The USA financial institutions in particular need at least the same level of regulation as Australian banks.
I think the regional variations that would be required to cater for different circumstances across the globe would render a global solution cumbersome. It would also place a large number of eggs in one basket which may well be more risky than the current model. Enabling regulators to recruit the best and brightest in true competition with commercial enterprise would be more beneficial than a super regulator.
I believe Australia's regime is as good as any in the world. Global regulation would involve compromise and possibly lower standards in this country.
Each country has different ethical boundaries so to try to impose global restrictions may not suit all. Also, what may be appropriate for large countries may not be appropriate for smaller developing countries.
History, including the history of attempted 'worldwide' cooperative effort over even say the last 30 years, tells us it won't work. Furthermore financial systems and conditions and their underpinnings vary considerably throughout the world.
The lack of regulation in specific countries has global implications.
Given the increasing complexity of the international financial markets and use of derivatives and other such devices to enhance the short-term profitability of the players in the financial markets, there is a need for a better risk assessment framework to be established that will provide a level of transparency and ensure appropriate risk rating of the products sold.
As with accounting standards, there needs to be some movement towards comparability in regulation, given that funds can be borrowed globally.
Generic regulation would deny cultural requirements.

2. If global regulation was introduced, should it be?

a) prescriptive? 21%
b) principles-based? 79%

Comments:

People get round the ASX principles every single day and pay lip service to them only. You need something stronger — voluntary is viewed as exactly that — a bigger stick is needed.
Prescriptive will not work in all jurisdictions and principles-based will be very difficult to enforce.
Probably a combination of prescription and principle-based. US regulation tends to be more prescriptive (eg Sarbanes Oxley) than Europe and Australia and because the US is a significant part of the global capital market any solution should be capable of being readily integrated with their regulatory system.
Principles-based is nice in theory but obviously not sufficient given recent events.
Principles-based is most effective, avoiding black letter of law compliance only.
Probably prescriptive as principles-based may be watered down in some jurisdictions to suit particular needs.
Still open for interpretation and innovation.
Prescription would require uniform enforcement. Not feasible.
Definitely principles-based so as to provide regional flexibility.
Cannot be prescriptive with the many cultures and various levels of government intervention.
General principles of what the financial system should look like and how it should react to various forces would give a working model potentially capable of general acceptance and application. A prescriptive system approach would, in the unlikely event that it could be agreed, become unworkable/unenforceable at the first major test.
There should be certain autonomy to fit the circumstances in different countries.
The prescriptive approach previously established in the US (my understanding in reading and listening to current affairs) has been all but suspended during the bull market run, home price surges and general easy credit. If there was a need for transparency and better risk analysis, principles-based regulation: then the so called "sub-prime" mortgages which were cut and diced with quality products would not hold the same appeal as their marketability would be diminished due to their true credit rating being apparent.
Some prescriptive measures would be appropriate however principles-based approach would allow some flexibility for tailoring while still providing an overall risk management structure to exist.
Generic guidelines subject to local requirements.

3. The Australian Prime Minster has said ‘We will be urging the G20 to commission an action agenda in collaboration with the International Monetary Fund, the Financial Stability Forum and the Basel Committee on Banking Supervision on the best means of implementing this initiative, preferably by the end of this calendar year.' The UK Prime Minister Gordon Brown has called for a new Bretton Woods to recognise the globalisation of financial risk in the responsibilities of global institutions, that would involve ‘a global early warning system’ to prevent future financial crises from spreading, ‘globally accepted standards of supervision and regulation’, effective ‘cross-border supervision’ of the world's 30 largest multinationals, and ‘cooperation and concerted action’ at times of crisis. Against that background do you have any thoughts as to what regulatory body/bodies would need to be established to oversee any form of global regulation?

If yes, please describe:

No Bretton Woods ever again.
Transfer of discretion on a random basis — or maybe a review of the board's decision — a quasi tribunal if you like — re whether directors and management meet short and long-term performance hurdles to an external party — boards are self-interested and are generally ruled by a dominant personality who everyone is too scared to stand up to.
Whatever the body looks like, in order for it to be effective, it would need the commitment and support of politicians, central banks and regulators.
International APRA equivalent.
IMF could be given the extended role.
I have major reservations about regulating the markets and need to hear the broad range of expert views before taking action — I hope governments resist any popular reactions and take a considered approach.
Allow the markets to determine, politics should be left out of the equation.
Not feasible.
The bodies would have to identify risk profiles, ‘what benefits do hedge funds provide to global markets?’, ‘what are the market benefits of complex lending structures — do they add to liquidity OR are they established to “avoid” reporting rules?’, “how do you incentivise risk takers compared to the risks they take?’
IMF-style regulatory body supported by the United Nations with power to ban operations in specific countries if they do not obey regulation.
I think a better model is a variation on the existing model where the country regulators share information and adopt common approaches, tailored to regional circumstances — this is more practical.
This is a legally complex minefield that sounds good in theory but will be impossible to implement in practice. No international body has or could ever hope to have jurisdiction in this area. The best that could be hoped for would be globally consistent legislation enacted by individual countries on an opt-in basis. Plus cross-border supervision of the top 30 multinational companies is never going to work in practice, and due to changes in who makes the top 30 in any (calendar? fiscal?) year will eventually flow down to all substantial multinational entities. To whom would they report? Every jurisdiction where they operate (as at present occurs) or is this an additional compliance obligation? If so, there is huge incentive to keep from getting too big. Beware the law of unintended consequences.
No. The International Criminal Court methodology is yet to be made to function properly so I'm not hopeful that some sort of international 'financial super-cop' could be made to work.
I would have thought the IMF or similar body could have warned about the lack of credit regulation in major economies. If they did, no one listened.
The whole issue of derivatives, short selling and other forms of market manipulation needs to be carefully considered. Given the size of superannuation, sovereign state funds and the like need to be included as their combined financial weight could and should assist in bringing more accountability to the market.
An independent regulatory body with an objective view and adaptable methodologies.

4. Should rating agencies take their funding from:

a) the issuer? 3%
b) the investor? 32%
c) neither and be truly independent? 65%

Comments:

The investor over issuer any day.
As it is for the investor's benefit, a fee for service.
The investor relies on the rating and should pay for it.
Rating agencies should be regulated.
The investor requires the service and should therefore directly pay for same.
Who would cover the cost? The governments!!!
In a perfect world they would be truly independent, including not being subject to influence from governments through funding aspects, but how that might be achieved is hard to see.
Without true independence, how can they provide the critical analysis necessary to allow a true evaluation of the risk? The investor this time may be the issuer next time, so any alliance is a compromise.
As long as the investor did not have a significant stake.

5. If global regulation was introduced, what end of the market should it regulate?

a) banks   74%
b) investment banks  87%
c) other financial institutions 61%
d) brokers   32%
e) advisers   29%
f) market operators  61%
g) rating agencies  45%

Comments:

Where are the biggest risks and where are the biggest incentives to take them, ie the richest rewards? The investment banks.
Fund managers and hedge funds need to be regulated as well.
Brokers/advisers/rating agencies more fee for service.
Investment banks are closest to the risky, financially engineered products that have caused most of the problems.
While stock brokers and financial advisers are currently regulated by ASIC, mortgage brokers need to be regulated as well by a competent authority.
Only those that can manipulate the market for themselves.
This question highlights another aspect of the degree of difficulty in trying to introduce global regulation. It can only work if all parties who may influence the system are regulated.
Without a deeper understanding of the issues in Europe these are the ones I see as needing better regulation. In Australia the ASX has been appalling at regulation of short selling and the like, the rating agencies have not been able to truly understand the dicing and splicing that has been behind much of the derivatives on the market, and therefore their risk analysis has been inadequate at best, and the investment banks have displayed an enormous lack of ethics and hubris in their dealings with regulators, legislators and the general public.
Regulate commissions and kick backs.

6. If global regulation was introduced, how should it be funded?

Please describe:

Banks.
By industry.
Similar to the IMF, with country member contributions based on the level of the country's participation in the global financial market, which in turn reflects the number of votes the country exercises in operating the regulator (up to a maximum level).
GDP-based.
Each country has regulators who should be used with a central body funded by existing regulators (which means from market participants or government).
APRA-type funding model.
To be independent it would need to be publicly funded.
Levy on regulated institutions, corporations.
Should not exist.
A surcharge levied on participants in those markets.
IMF.
Fee for operating licence.
By the industry participants being regulated.
Tax collection-based.
I suppose like the UN is theoretically funded — a percentage of GDP of participating nations to the central body.
Who funds IMF, United Nations, etc? Similar
By governments who could then cut down on local regulations?
A world model using a system of levies on individual countries developed from the United Nations funding model.
World banks/financial institutions could pay a levy based on funds on deposit in exchange for a financial audit.
I am not in a position to comment but would have thought that the banking sector should be a major contributor.
It will ultimately be taxpayers/consumers. A combination of central banks and institutions.
By contribution from the existing regulatory bodies.
By government.

7. In light of recent events, has your organisation had difficulty accessing finance since the credit crisis commenced?

a) Yes 34%
b) No 66%

Comments:

It's dire. I expect to lose my job as a result.
Was able to extend facilities at additional cost.
We have experienced increased funding costs, and lack of choice.
Still being approached, and more so now.
Raising equity capital at the present time is virtually impossible.
Our bank has delayed loan restructuring.
Haven't tried but still receiving offers for corporate cars, overdrafts.
Acquisition finance.
Cash-rich organisation in relation to its size.