Considering regulatory intervention, there must be a market failure that relates to the objectives of financial regulation and the livelihood that such interventions will provide a net benefit. We have to assess the cost of action and the probability that we might get fail to achieve our target outcome.
Even where there is a possible case for regulatory intervention, there is often more than one option available to us.It is a mistake to imagine that regulatory intervention always means the introduction of new rules. It doesn’t alert media, comm. Collaborations with industries and consumer education are equally valid and indeed in many preferable ways of solving problems. We are required to undertake core benefit analysis when we introduce new rules but we aim to make continuous use of a similar sort of calculus –albeit more informally in deciding on the most proportionate means or achieving our objectives.Market oriented regulators needs to be risk based, we have an infinite number of potential calls on our resources, but of course these are risky.
Therefore resources need to be put where they prove to be most effective in terms of the amount of attention which is paid to individual firms and market wide issues. The risk based applications applies equally to do enforcement where we aim to be strategic to ensure that our ITD enforcement resources achieve the max possible effect.And given the competing claims we concentrate on those that preserve the greatest threats. Effectiveness of resources can be maximized by following any of the below mentioned ways:- 1. In the use of arrow framework to form risk based firm assessment that one used to set the degree of regulatory attention that we give to financial institutions.
2. Including, way is by maintaining a continuity dialogue with the regulators community to understand better the risk inherent in particular sectors and to make evidence based policy making a reality.3. Third application is our collaboration with overseas regulators bilaterally and through international committees, to develop common solution to cross border issues.
In Depository Participants (DP) key potential risks includes:- 1. Possibility of serious market disruption and erosion of confidence level as a result of the failure of a fund/s of sufficient size. 2. The possibility that market liquidity could be disrupted as a consequence of several funds making concentrated investments in complex financial investments.3. Whether conflicts of interest are giving rise to Valuation weaknesses.
To overcome such risk, regulators need to be extra vigilant and cooperation and coordination with other international regulators to find a solution to overcome such Problems. Regulators have to take major banks and investment banks into confidence to ensure the actions they will take to reduce and then eliminate the volume of confirmation delays and to establish an acceptable METHODOLOGY for assignments.The firms are the best placed to understand the structure of the markets in which they operate and craft solution that reduce risk without unduly insisting trading activity and credit diversification. Now there is a need that the action which has been set out in that reply must be translated into practice. International regulatory cooperation is a complex issue, different regulators have different philosophies. Thus, it would not lead to constructive solutions to the benefit of the financial industry.
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