Impact On and Responses of Emerging Markets To The Financial Crisis

Impact On and Responses of Emerging Markets to the Financial Crisis Consultation Report EMERGING MARKETS COMMITTEE OF THE INTERNATIONAL ORGANIZATION OF SECURITIES COMMISSIONS June 2009 This paper is for public consultation purposes only. It has not been approved for any other purpose by the IOSCO Emerging Markets Committee or any of its members. i Foreword The IOSCO Emerging Markets Committee is publishing this report of its Task Force on the Impact on and Responses of Emerging Markets to the Financial Crisis (Consultation Report) for public comment. The Consultation Report examines, based on results received to a Survey circulated to all EMC members, how the emerging markets were hit by the global financial crisis and how they are planning to respond to it. This Consultation Report seeks to make recommendations on how jurisdictions may mitigate future shocks and identifies areas for further work and investigation. Comments are sought on the content of the Consultation Report including issues identified, the scope and relevancy of the recommendations and discussions of the impact and responses in the context of the responses received. The Consultation Report will be finalised after consideration of comments received from the public. How to Submit Comments Comments may be submitted by one of the three following methods on or before 21 July 2009. To help us process and review your comments more efficiently, please use only one method. 1. E-mail • Send comments to Greg Tanzer, Secretary General, IOSCO at the following email address: emccrisisreport@iosco.org. • The subject line of your message should indicate “Public Comment on the Impact on and Responses of Emerging Markets to the Financial Crisis”. • Please do not submit any attachments as HTML, GIF, TIFF, PIF or EXE files. OR 2. Facsimile Transmission Send a fax for the attention of Greg Tanzer using the following fax number: + 34 (91) 555 93 68 OR 3. Post Send your comment letter to: Greg Tanzer Secretary General IOSCO C / Oquendo 12 28006 Madrid Spain ii Your comment letter should indicate prominently that it is a “Public Comment on the Impact on and Responses of Emerging Markets to the Financial Crisis”. Important: All comments will be made available publicly, unless anonymity is specifically requested. Comments will be converted to PDF format and posted on the IOSCO website. Personal identifying information will not be edited from submissions. 1 TABLE OF CONTENTS EXECUTIVE SUMMARY 4 CHAPTER 1: BACKGROUND, MOTIVATION AND APPROACH 6 Background and Motivation 6 Approach of the survey 7 Permanent Questions 8 Topical questions Summary of Respondents 8 9 CHAPTER 2: CONCLUSIONS AND RECOMMENDATIONS 10 Conclusions General Conclusions Areas for Further Inquiry Context of the Ongoing G-20 Process Recommendations CHAPTER 3: SUMMARY OF SURVEY RESULTS Introduction 10 10 13 15 15 18 18 Approach to setting out responses 18 Key Regulatory and Supervisory issues before the onset of widespread global financial turbulence 25 Key Regulatory and Supervisory issues after global turbulence became more pronounced 30 Sources of instability 34 Measures undertaken to address instability 35 Additional Information and Comments Received 37 CHAPTER 4: ANALYSIS OF SURVEY RESULTS 38 Sustained focus on systemic risk issues 39 Increasing emphasis on regulatory approach and capacity 41 Increased focus on business conduct of market participants 43 Continued market development efforts 43 Macroeconomic risks to markets 44 Regulators have acted more proactively in combating the crisis 48 APPENDIX 51 Appendix 1: Detailed Survey Results 51 Appendix 2: EMC Chairman‘s Task Force on Financial Crisis 73 Appendix 3: The Core Task Force Team 77 Appendix 4: GDP and market capitalization data for the Sample jurisdictions 78 Appendix 5: The Survey Questionnaire 81 Appendix 6: Mandate 84 2 LIST OF TABLES AND FIGURES Table 1 Sample jurisdictions .............................................................................................. 9 Table 2 Summary of categories and subcategories for questions 1 to 4 .......................... 19 Table 3 Regulatory and supervisory issues faced by emerging market regulators in the 12 months prior to December 2008 ........................................................................................... 26 Table 4 Sample of responses relating to Systemic Impact .............................................. 27 Table 5 Sample of responses relating to Market impact .................................................. 28 Table 6 Sample of responses relating to Governance and Compliance Issues ................ 29 Table 7 Changes in perception of regulatory and supervisory issues faced by emerging market regulators in the 12 months after g