The end product is usually of laudable standards and serves as a good yardstick for domestic practices to be benchmarked against. Investor protection The third reason is that a common set of standards facilitates sound regulatory oversight that is based on consistent treatment of cross-border markets and activities. With regulators using the same standards in assessing systems, products and practices, market players that deal with foreign institutions or instruments can take comfort that those institutions and products are regulated based on similar high standards. Efficiency & cost savings And the fourth reason is that the establishment of a set of standards that is subscribed to internationally has the effect of aligning the regulatory practices in different jurisdictions. This allows international financial institutions operating in different markets with similar features and rules drawn up according to international standards, to benefit from lower compliance costs. Given a choice, from the business proposition point of view, few fund managers, issuers or financial advisers would wish to expend resources on compliance systems to keep track of different requirements and procedures in different markets. Much work is already underway to develop international standards on specific subjects. Within IOSCO, MAS is a participant of various of its working groups including the Internet Project Team and the Implementation Committee which, as its name suggests, has been tasked to implement the 30 IOSCO principles of securities regulation. Apart from IOSCO, a number of other fora has also proposed recommendations in their respective areas.

Since the mid-1990s, MAS has entered into a number of such MOUs to ensure that the level of regulatory collaboration keeps pace with the capital market linkages that are in place. A formal arrangement enshrined in an MOU may not be necessary in all cases, but are helpful amongst jurisdictions with substantive capital market linkages or trading arrangements in place. Impetus for international standards The second proposition is the growing impetus for international standards. In this regard, IOSCO has taken the lead in putting forward a set of principles which its members subscribe to. Some of the principles are necessarily pitched at a broad level, to allow members to agree on key areas which regulators should focus their attention. The challenge ahead is to continue working systematically on the principles to further cross-reference against quantifiable standards. There are several reasons why such international standards are important. Danger of a weak link in the system The first is that interconnected markets means that transactions involving intermediaries or markets in different jurisdictions are always exposed to the weakest link. As an example, a localised weak link in clearing and custody networks used for cross-border transactions that buckles under stress will have far reaching repercussions on the smooth functioning of counterparties and markets in other jurisdictions. 2  BIS Review 31/2002  Benchmarking The second reason is that, whereas regulations are developed for local usage, international standards are invariably developed under the close scrutiny of different regulators, and are derived after rigorous debate and sometimes protracted fine-tuning.