Featured Product

    BIS Report Examines Policy Options for Development of Capital Markets

    January 23, 2019

    BIS published a report that examines trends in capital market development and identifies the factors that foster the development of robust capital markets. The report finds that large differences persist in the size of capital markets across advanced and emerging economies. Emerging-economy markets have been catching up with their more advanced peers, but the gap has not yet been closed.

    The report first discusses the importance of a strong enabling environment characterized by macroeconomic stability, market autonomy, strong legal frameworks, and effective regulatory regimes. It then identifies the drivers of capital market development—particularly better disclosure standards, investor diversity, internationalization, deep hedging and funding markets, and efficient and robust market infrastructures. Finally, the report presents the following recommendations across six broad areas and outlines practical ways in which policy can enhance these drivers, while recognizing that some potential policy actions lie outside the powers of central banks:

    • Promote greater market autonomy by addressing financially repressive policies, such as restrictions on initial public offerings to prop up stock market valuations or misuse of regulatory instruments that enable some to borrow at below-market rates
    • Strengthen legal and judicial systems for investor protection by easing access to legal remedies
    • Enhance regulatory independence, resources, and enforcement powers
    • Increase the depth and diversity of the domestic institutional investor base
    • Actively engage with potential market entrants and prepare for spillover risks
    • Coordinate regulations to develop deep complementary hedging and funding markets 

    The report concludes that enhancing market ecosystems by developing deep complementary markets for derivative, repo, and securities lending requires a coordinated effort along multiple dimensions. These include a supportive legal and regulatory environment, regulatory coordination to broaden the investor base in these markets, and robust and efficient market infrastructures such as central counterparties and trade repositories to manage potential financial stability risks. The report also discusses the merits of raising disclosure and accounting standards. In a number of cases, there appears to be regulatory scope to strengthen investor protection by encouraging improvements in the quality of disclosure and accounting. The current rules in a number of emerging market economies could be strengthened by bringing them into line with international standards. Key elements include requiring better disclosure of “related-party” transactions and information about board members, beneficial ownership, and control and group structures. 

    This report was prepared by the Committee on the Global Financial System (CGFS) Working Group. The analysis and recommendations of the Group, as expressed in this report, are based on a review of the existing academic and policy literature. The report also draws on hard data, along with information from a survey on market participants. Survey results presented in this report cover responses from 10 Working Group member jurisdictions. Five were the emerging market economies of Brazil, China, Hong Kong SAR, India, and Mexico while five were the advanced economies, namely Australia, Italy, Japan, Spain, and the United Kingdom. The findings of the report were bolstered by a survey of market participants in these 10 economies, which showed that high regulatory costs can make capital markets less effective in channeling financing to the economy.

     

    Related Links

    Keywords: International, Banking, Insurance, Securities, PMI, Accounting, Capital Markets, Disclosures, Derivatives and Hedging, CGFS, BIS

    Related Articles
    News

    HKMA Finalizes Policy Modules on Group-Wide Approach and Remuneration

    The Hong Kong Monetary Authority (HKMA) revised the Supervisory Policy Manual module CG-5 that sets out guidelines on a sound remuneration system for authorized institutions.

    July 29, 2021 WebPage Regulatory News
    News

    EBA Guide to Monitor Threshold for Intermediate Parent Undertakings

    The European Banking Authority (EBA) published the final guidelines on the monitoring of the threshold and other procedural aspects on the establishment of intermediate parent undertakings in European Union (EU), as laid down in the Capital Requirements Directive (CRD).

    July 28, 2021 WebPage Regulatory News
    News

    PRA Finalizes Approach to Supervision of International Banks

    In a recent Market Notice, the Bank of England (BoE) confirmed that green gilts will have equivalent eligibility to existing gilts in its market operations.

    July 26, 2021 WebPage Regulatory News
    News

    FCA Issues PS21/9 on Implementation of Investment Firms Regime

    The Financial Conduct Authority (FCA) published the policy statement PS21/9 on implementation of the Investment Firms Prudential Regime.

    July 26, 2021 WebPage Regulatory News
    News

    EBA Proposes Regulatory Standards to Identify Shadow Banking Entities

    The European Banking Authority (EBA) proposed regulatory technical standards that set out criteria for identifying shadow banking entities for the purpose of reporting large exposures.

    July 26, 2021 WebPage Regulatory News
    News

    IOSCO Proposes Recommendations on ESG Ratings and Data Providers

    The Board of the International Organization of Securities Commissions (IOSCO) proposed a set of recommendations on the environmental, social, and governance (ESG) ratings and data providers.

    July 26, 2021 WebPage Regulatory News
    News

    ESMA Group Issues Recommendations on RFR Switch in Interdealer Market

    The European Securities and Markets Authority (ESMA) published recommendations from the Working Group on Euro Risk-Free Rates (RFR) on the switch to risk-free rates in the interdealer market.

    July 26, 2021 WebPage Regulatory News
    News

    ECB Study Assesses Impact of Basel III Finalization Package

    The European Central Bank (ECB) published a paper as well as an article in the July Macroprudential Bulletin, both of which offer insights on the assessment of the impact of Basel III finalization package on the euro area.

    July 26, 2021 WebPage Regulatory News
    News

    ISDA Finds FRTB Results in Higher Capital Charges for Carbon Trading

    The International Swaps and Derivatives Association (ISDA) published a paper that explores the impact of the Fundamental Review of the Trading Book (FRTB) on the trading of carbon certificates.

    July 26, 2021 WebPage Regulatory News
    News

    PRA Updates Remuneration Policy Statement Templates and Tables

    The Prudential Regulation Authority (PRA) published the remuneration policy self-assessment templates and tables on strengthening accountability.

    July 26, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7307