5 November 2020- Speech by Greg Medcraft, Director of Financial and Enterprise Affairs, OECD, at the 2020 Eurofi Annual Financial Services Policy Summit

1. INTERNATIONAL FINANCIAL
REGULATION – SUPERVISORY AND
REGULATORY CONVERGENCE
5 NOVEMBER 2020
Greg Medcraft
Director, Directorate for Financial and Enterprise Affairs, OECD

2. 2
INTERNATIONAL FINANCIAL REGULATION: SUPERVISORY
AND REGULATORY CONVERGENCE
1. Supervisory and regulatory convergence: A global perspective
3. Global regulatory policies: What more can be done
2. Key challenges remaining in the reform agenda
OVERVIEW

3. 3
1. SUPERVISORY AND REGULATORY CONVERGENCE
PROGRESS HAS BEEN MADE TO ADDRESS MAJOR FAULTINES
 Since the global financial crisis, regulatory reforms in bank and non-
bank financial intermediation have addressed major fault lines, making
these activities more resilient to systemic risks.
• Higher capital and liquidity requirements
• Additional risk management for ‘Too-Big-
To-Fail’ Institutions
Banking Sector
• Guidelines and measures for investment
and money market funds
• Stronger securitisation regulation
Non-bank Financial
Intermediation

4. 4
2. KEY CHALLENGES REMAINING
HOWEVER, IMPLEMENTATION REMAINS UNFINISHED
G20 Markets European Financial Markets
 Implementation has occurred at
different paces
 Unintended consequences of
implementation may have left parts of
the system less resilient
 More integration is needed to
strengthen securitisation, equity and
green markets
 Opportunity for the Capital Markets
Union to support businesses affected
by Covid-19 and ensure a durable Exit
OECD instruments to guide regulatory convergence at the global level
 OECD Codes of the Liberalisation of Capital Movements
 OECD Policy Framework for Effective and Efficient Financial Regulation

5. 5
3. WHAT MORE CAN BE DONE
MORE WORK IS NEEDED TO ENSURE REGULATORY CONVERGENCE
ON FINTECH AND SUSTAINABLE FINANCE
Challenges
• Global convergence is important to address:
• 1) fintech challenges such as cross-border risks from crypto assets
and regulatory arbitrage
• 2) ESG alignment with financial and environmental materiality
Opportunities
• Financial technologies and sustainable finance are increasingly
important drivers of growth in financial markets
OECD work
• OECD work on tokenisation of assets, tokenisation policy toolkits,
BigTech, Blockchain high-level principles, ESG Investing, the
Environmental pillar of ESG, and climate transition risks

6. 6
CONCLUSION
1. Unprecedented efforts in global regulatory convergence have
helped make financial systems more resilient
2. Regulatory convergence remains a work in progress
It could fall behind if there is under-preparedness of the systems for emerging risks
on the horizon
3. Critical to build on Covid-19 global coordination to get ahead of
the curve
Addressing existing gaps and strengthening practices regarding emerging activities
and risks will support resilient sustainable growth for decades to come

7. THANK YOU
7

8. 8
In the United States, ESG ratings vary more widely for the same firms than issuer credit ratings (2019)
ANNEX 1
SUSTAINABLE FINANCE NEEDS POLICY WORK TO ENSURE MARKET
RESILIENCE
 ESG rating methodologies vary widely, with different metrics used across rating
providers, limiting comparability.
Note: Sample of public companies selected by largest market capitalisation to represent different industries in the United States. The issuer credit ratings are transformed using a projection to the scale
from 0 to 20, where 0 represents the lowest rating (C/D) and 20 the highest rating (Aaa/AAA). Source: OECD Business and Finance Outlook 2020

9. 9
Note: The portfolios have been built using companies with an E pillar score. The stocks in the E pillar tilted portfolio have been weighted by the E pillar score (E pillar
score* Market Capitalization) and the result has been normalized at 100%. Source: OECD Business and Finance Outlook 2020
CO2 emissions in high-ESG portfolios can be higher than standard portfolios
ANNEX 2
SUSTAINABLE FINANCE NEEDS POLICY WORK TO ENSURE MARKET
RESILIENCE
0
1
2
3
4
5
6
7
Provider 1 Provider 2 Provider 3
Weighted CO2
Emissions
Millions
Millions
Standard Portfolio E Pillar Tilted Portfolio
 ESG practices lack clear alignment with environmental or financial materiality,
showing little evidence of risk adjusted returns over the past decade

10. MORE INFO:
WWW.OECD.ORG/FINANCE/FINANCIAL-MARKETS/