FOREWORD IV

EXECUTIVE SUMMARY 1

1. INTRODUCTION 6

1.1. THE COSTS OF REGULATORY AND SUPERVISORY COMPLEXITY 7

1.2. WHAT DRIVES COMPLEXITY AND FRAGMENTATION TODAY 8

1.3. SUPERVISORY CAPACITY UNDER STRAIN 9

2. THE FRAMING OF COMPETITIVENESS IN THE FINANCIAL SECTOR 11

2.1. WHY COMPETITIVENESS MATTERS IN FINANCIAL REGULATION 12

2.2 WHY COMPETITIVENESS MATTERS FOR FINANCIAL SUPERVISION 14

2.3. AN ASSESSMENT OF COMPETITIVENESS BY SECTOR 15

3. DIAGNOSTIC SYNTHESIS – A FRAMEWORK THAT IS HARD TO RUN AND CONVERGE 25

3.1. A SMARTER RULEBOOK: FROM ACCUMULATION TO PROCESS RE-ENGINEERING 26

3.2. SMARTER SUPERVISION: FROM FRAGMENTED TO CONVERGENT WITH ACCOUNTABILITY 27

3.3. WHY THIS DIAGNOSIS MATTERS FOR COMPETITIVENESS AND INTEGRATION 27

4. REFORMS TO RULEMAKING – SIMPLER, PROPORTIONATE AND STRATEGIC 29

4.1. A STRATEGIC APPROACH TO SIMPLIFICATION AND BURDEN REDUCTION 30

4.2. A REBALANCED REGULATORY ARCHITECTURE 33

4.3. COMPETITIVENESS EMBEDDED AS A SECONDARY OBJECTIVE 36

4.4. IMPROVED IMPACT ASSESSMENTS, TRANSPARENCY AND EX-POST EVALUATION 39

4.5. ENFORCEMENT AND GOVERNANCE 41

4.6. LONG-TERM REFORM 43

5. REFORMS TO THE SUPERVISORY FRAMEWORK – MORE COHERENT AND EFFICIENT 45

5.1. STREAMLINED SUPERVISORY REPORTING 46

5.2. REDUCED FRAGMENTATION FROM WAIVERS, OPTIONS AND NATIONAL DISCRETION 48

5.3. STRONGER ESAS THROUGH CONVERGENCE, COORDINATION AND ACCOUNTABILITY 50

5.4. A SUPERVISORY EFFICIENCY TEST FOR CAPITAL MARKETS 52

5.5. A REAPPRAISAL OF THE SUPERVISORY ARCHITECTURE: THE SREP AS A CASE STUDY 54

6. RECOMMENDATIONS 56

6.1. REGULATION – SIMPLER, MORE PREDICTABLE AND BALANCED 56

6.2. SUPERVISION – MORE EFFECTIVE, CONSISTENT AND ACCOUNTABLE 59

REFERENCES 63

APPENDIX A. MEMBERS OF THE TASK FORCE 66

APPENDIX B. TASK FORCE MEETINGS AND SPEAKERS 68

APPENDIX C. FROM GLOBAL STANDARDS TO EU FINANCIAL SUPERVISION AND DATA 69

APPENDIX D. REGULATORY EXPANSION, ADJACENT POLICY DOMAINS AND THE COORDINATION CHALLENGE71

APPENDIX E. REGULATING RISK IN FINANCE – AN EVER-EXPANDING RULEBOOK 75

APPENDIX F. RISK SUPERVISION – WHERE THE SYSTEM FALLS SHORT 90

PRINCIPLE S AND GUIDELINES FOR THE TASK FORCE 102