Regulatory mandates

If there was one thing that used to rankle when I was a regulator it was my belief that other regulators were paying insufficient attention to important issues such as consumer protection, financial inclusion, climate change and supporting economic development because they saw their job very narrowly - i.e. in terms of safety and soundness/financial stability - rather than more broadly, i.e. in terms of serving the public interest.

I’d have to say, however, that regulators seem to have put such thoughts to one side when it comes to playing a part in responding to the current global health crisis. I hear less from regulators these days about limits on their statutory responsibilities stopping them from helping, and more about how - even if they don’t have a specific statutory mandate - they are working together with the financial sector for the greater good. This is clearly very welcome indeed, and let’s hope it continues, and that the focus continues to be on how the financial sector can support people and businesses.

A recent paper by the BIS Financial Stability Institute, The universe of supervisory mandates – total eclipse of the core? puts it very well, when it notes that: “Generally, all supervisory objectives are ultimately designed to serve the public interest. A banking supervisor does not aim to preserve the safety and soundness of a bank and the banking system for the sake of the banking industry. Rather, the ultimate goal is for the banking system to be able to continue serving its customers and supporting economic activities.” Hear, hear!