As the global crisis in the financial markets takes its toll, at more and more firms questions are being asked about what the regulatory future will look like. But the recent announcement from the Basel Committee that it is to press ahead with specific regulatory measures as quickly as possible, signals the likely future: a tougher regulatory regime for financial institutions. As well as new regulations coming in to play, regulators will enforce existing requirements with more rigour, and tougher supervision will drive most of the remedial work firms undertake.
It's a trend that is already observable. And if the amount of regulation and the level of scrutiny is changing, then so are its inherent characteristics – with important implications for institutions attempting to adapt to the new regime. In the UK, we are now entering the era of principles-based regulation, moving away from the "box-ticking" exercises of the more recent past. The FSA will set the direction for a particular regulation and leave the question of how it will actually be implemented, and what standards are to be applied, to the market participants themselves.
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