Single regulator pushed for financial sector

The Securities and Exchange Commission (SEC) is pushing for the establishment of a single supervisor for the entire financial sector to minimize gaps in the regulation of financial intermediaries and, in turn, curb corporate fraud or failures.

SEC Chairperson Lilia R. Bautista said the country should consider moving towards the consolidation of all financial market regulations into a single entity to tighten government regulation over the financial markets.

"In addition to the ability to regulate financial conglomerates better, unified regulation also promotes regulatory efficiency by avoiding duplication in support infrastructure and the avoidance of turf wars or simply the removal of doubts over jurisdictional questions that could weaken regulatory effectiveness," Bautista said.

The Bangko Sentral ng Pilipinas (BSP) regulates the banking industry and formulates monetary policy while the SEC supervises the equities market, non-bank financial institutions and corporations.

The SEC and BSP have dual control over some areas and activities of investment houses. Investment houses which are subsidiaries or affiliates of banks are under the BSP because of their direct effect on their parent companies. The BSP, however, has no responsibility over investment houses’ securities-regulated activities while commercial paper registration and underwriting is left with the SEC.

"Our overriding concern is the mismatch between our existing regulatory structure and the structure of the financial industry that we supervise. We are faced with financial conglomerates whose separate supervision leaves too many gaps," Bautista said.

Bautista said lumping SEC, BSP and the Insurance Commission into a singular entity will bring about cost-effectiveness and uniform regulatory approaches and enforcement.

The SEC chief said there would be a need for legislation to incorporate securities and insurance within the central bank. This, Bautista said, would make the central bank a very powerful body but there would be economies of scale and there would be no regulatory arbitrage.

Bautista said another alternative was to insulate the Monetary Board from the day-to-day problems of regulation by specifically providing that there would be three deputy governors to handle the three areas of banks, insurance and securities whose decision are final and can only be appealed to the courts.

"This would enable the Monetary Board to concentrate on monetary policies and set direction over regulatory policies. It need not be bothered by the audit of banks, brokers, listed companies and insurance companies. The three regulators must be part of the Monetary Board," Bautista said.