Financial Policy and Regulation: APEC Region Initiatives

Financial Policy and Regulation:
APEC Region Initiatives
Kevin Davis
Professor of Finance, University of Melbourne
Research Director, Australian Centre for Financial
Studies (and Professor, Monash University)
University of Melbourne 1
Financial Sector Functions
Traditional view: a “handmaiden of industry”
But financial sector development is an important
determinant of economic growth
But not an end in itself! (and there are risks)
interrelationships between globalization and financial sector
Want good performance of key economic functions
Clearing and settlement of payments
Pooling financial resources for investment
Transferring financial resources – time & space
Managing risk (diversification, insurance)
Information provision for efficient financing (financial prices)
Resolving incentive problems (monitoring etc)
University of Melbourne 2
Assessing Financial Sector Performance
• Objectives: low cost of capital; efficient allocation of
capital; financial inclusion; efficient risk-bearing;
optimal savings behaviour; financial & economic
• Measuring achievements
– Financial sector size, composition, competition
– International ratings, expert assessment
– Statistical indicators (spreads, transactions
costs, participation, cost of capital)
University of Melbourne 3
Markets v Government Initiatives
• Market forces tend to lead to innovations to fill
gaps – but impediments may exist
– Property rights; barriers to entry; taxes;
inadequate information; regulation;
• But current position arising from historical
evolution may now be sub-optimal and market
unable to “leap” to new optimal position
– Example: bank intermediation v bond
market – latter requires liquidity which
requires market depth
University of Melbourne 4
A range of initiatives
Asian funds passport
Mutual recognition (re securities issuance)
Stock exchange integration (cross listings etc)
Ratings agencies
Credit bureaus
Bond market development
Trade in financial services
Investor protection
Creditor rights
Corporate insolvency
Retirement Incomes Policy
University of Melbourne 5
Deposit insurance
Prudential regulation and supervision
Resolution arrangements
OTC markets
Clearing & settlement systems
Financial inclusion
Financial literacy
SME financing
Infrastructure financing
Public sector financing and treasury management
Central bank FX swap agreements
University of Melbourne 6