Global Financial Strategy - Hong Kong rejects 'race to the bottom'

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Hong Kong rejects ‘race to the bottom’

Monday 31 October 2011 – by Will Henley

The chief executive of Hong Kong’s Securities and Futures Commission has said he wants to avoid an international regulatory “race to the bottom”.

Ashley Alder told a conference of the Investment Funds Association on Friday that he would ensure the Chinese special administrative region delivers on G20 reforms of securities markets.

“We should not seek to join any race to bottom as far as regulation is concerned and I do not believe that regulation should be used as a competitive tool,” Alder said.

The remarks follow concerns that some jurisdictions might implement required reforms selectively or lag behind the US and Europe in a bid to attract firms fleeing onerous regulatory curbs.

In June, US commissioner Bart Chilton of the Commodity Futures Trading Commission expressed fears that the migration of trading to “less well regulated” areas would lead to a “race to the regulatory bottom”, although he did not single out Hong Kong specifically.

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The SFC and Hong Kong Monetary Authority sought to quash doubts earlier this month when they announced that they are working toward the G20 targets. However, their joint statement admitted that a 2012 target date is dependant on implementation elsewhere.

Alder nonetheless said on Friday: “We are committed to the key G20 reforms because the need to ensure that reforms are directed at containing systemic risks and also protecting investors is an overriding concern in light of the fallout from the financial crisis.

“Quality regulation results from an interactive process, which is why it is important for an organisation like ours to continue to communicate with a cross section of the market as well as globally.

“We cannot do this in isolation. It’s very important for Hong Kong to remain effectively in lockstep with the main goals of internationally agreed reforms,” he added.

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