‘Regulation is about finding balance’

Managing Director & CEO of the BVI Financial Services Commission (FSC), Robert Mathavious, believes regulators and supervisors have to know how get the balancing act right.

He was speaking last week at the FSC Annual Lecture entitled, “Financial Services for the Future: Courage, Candour, and Common Sense”. Mathavious explained, “On one hand, they [regulators] have to respond to financial institutions of integrity, who will no longer tolerate regulatory environments that expose them to reputational risks. They also have to accept that too little regulation or weak or inadequate enforcement can lead to avoidable failures and malfeasance and the destruction of confidence and business.

“On the other hand, regulators and supervisors have to realise that over-regulation can create unnecessary bureaucratic burdens, stifle innovation, hamper success and also destroy businesses. So good regulation requires a balanced and differentiated approach; supervisory resources must focus on those firms and activities that pose the greatest reputational risk to the jurisdiction. Some call this risk-based, risk-focused or right-touch regulation. I call it common sense, pragmatic regulation and I believe in it.”

He added, “Firstly, in today’s constantly evolving, globalised world, I firmly believe we accomplish more if we work collaboratively than if we work in silos. Secondly, I strongly believe we must have the courage to do what is right, not what is expedient or what we have always done, even if this means swimming against the tide and taking action that is difficult or may seem counterintuitive. I believe that... money moves quickly; honest, excellent service and balanced, internationally compliant regulation are essential, and cooperation and courage pay off.

Mathavious shared his beliefs, he said, “In today’s increasingly globalised world, money and the management of wealth are the world’s most fungible commodities. Squeeze them too tightly in any one jurisdiction and you cause them immediately to shift to another jurisdiction where they can better exploit opportunities. Money has no national loyalty.

Next, I believe that global clients will come to a jurisdiction only if they expect to receive high-quality, efficient and innovative services, and be treated fairly and honestly. If they don’t expect that, they will go somewhere else.
I believe, too, that compliance with international regulatory standards is a sine qua non for reputable financial centres. With compliance comes international respectability, and with respectability come opportunities for the financial sector to trade, source and do good, legal, profitable and sincere business with persons outside the jurisdiction… .”

The CEO made it clear, “as regulators, it is beyond our power to bring order to global turbulence and uncertainty, but, it is our responsibility and our duty to preserve and protect, maintain, and enhance a sound, stable and successful business environment for economic growth that allows people to pursue their dreams, both for the present and for the long haul. Regulators exist to serve the public interest. Every day, people count on us regulators not to let them down. They look to us and really want us there to give them hope for the future. Every day, they count on us to keep the financial sector safe and secure and the domestic market free from scandals, malfeasance and market abuse… .” (NB)