The International Regulatory Strategy Group (IRSG) publishes a Global Regulatory Coherence Dashboard
To understand the impact of increasing global regulatory fragmentation, the International Regulatory Strategy Group (IRSG) has developed a ‘Global Regulatory Coherence Dashboard’ to map the extent of global alignment or divergence in financial regulations across key policy areas affecting UK-based financial and related professional services.
The dashboard highlights both priority areas where the UK can continue to show its global leadership in promoting regulatory coherence as well as areas of fragmentation or divergence where greater attention or new approaches are required.
Global regulatory coherence is crucial for maintaining financial stability, market efficiency, and supporting a connected economy. As a major global financial hub, the UK has significant interest in promoting coherence in the international regulatory environment. HM Treasury’s Financial Services Growth and Competitiveness Strategy set out the objective of “upholding and shaping international financial regulatory norms and standards.”
Regulatory fragmentation, especially in emerging sectors like digital assets and artificial intelligence (AI) poses risks and challenges for cross-border financial and related professional services industries, increasing costs and complicating regulatory compliance.
Commenting on the dashboard, Farmida Bi, Chair of the IRSG Council, said, “As global financial markets become increasingly interconnected, regulatory coherence is ever more important for stability, efficiency, and innovation. Having a clear picture of the global landscape not only highlights the UK’s leadership in shaping international standards, but also areas where there is urgent need for collaborative solutions, such as sustainable finance and digital assets. By working with global standard setters and embracing innovative approaches, the UK can continue to ensure it remains open, competitive, and resilient in a rapidly evolving landscape.”
The dashboard identifies key areas for the UK to work with international standard setters and other jurisdictions on regulatory coherence through global frameworks and provides recommendations for government and policymakers. It outlines the complexities associated with regulatory fragmentation in emerging areas such as digital assets and AI, as well as issues related to inconsistent approaches to cross-border data flows.
Priority areas for collaboration include:
- Sustainable finance: The International Sustainability Standard Board’s (ISSB) standards on sustainability disclosures offer a pathway to transparent, high-quality, and comparable sustainability-related financial disclosures worldwide. The UK must work with the ISSB and other stakeholders to ensure consistent adoption.
- Operational resilience: UK regulators are well-positioned to advocate for international interoperability of operational resilience frameworks which is crucial for maintaining a robust and resilient financial system.
Areas where for more immediate action or innovative strategies are needed include:
- Digital assets: To maximise its influence on digital assets regulation, the UK should demonstrate leadership in distributed ledger technology (DLT) and securities tokenisation as well as establishing its stablecoin and cryptoassets regime. The UK should work with international bodies to establish common / interoperable pathways to digital securities issuance, custody and transfer.
- AI: The UK should maintain its technology-neutral approach and support the development of common voluntary guidance and technical standards for AI governance. This can help inform interoperability of existing domestic regulatory regimes and facilitate the cross-border adoption of AI solutions.
- Data: In the absence of a global agreement on data flows, the UK should continue to use adequacy and bilateral arrangements to support free data flows with key markets. However, the UK should continue to work towards multi- or pluri-lateral approaches of mutual recognition based on independent standards.
Work to produce the dashboard shows that global regulatory coherence often results from established, internationally agreed frameworks, whereas newer, complex, and politically sensitive areas of regulation tend to be more fragmented, which presents both opportunities and challenges for the industry, government, and regulatory authorities.
ENDS