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Oteh calls for bracing of risk-based supervision

By on February 24, 2013

Chairperson, Africa and Middle East Regional Conference (AMERC) of the International Organisation of Securities Commissions (IOSCO) and Director General of the Securities and Exchange Commission of Nigeria, Arunma Oteh, has called on securities market regulators across Africa and the Middle east to accelerate adoption and institutionalization of risk – based securities market regulation model as a means of consolidating the current growth being experienced in markets in the region and avoiding instability.

She made the call at the recent AGM of AMERC at the Dubai International Financial Centre, (DIFC), Dubai in the United Arab Emirates. The AGM’s thematic focus was: “Risk – Based Supervision as a Global Agenda”           

Oteh recalled the rationale for the adoption of risk – based model as residing in the weaknesses in the compliance –based supervision approach of old, which (weaknesses) were highlighted by the recent market meltdown.

She remarked that though the momentum of recovery appears slow in some jurisdictions, most markets in the Africa and Middle East Region had recorded considerable and sustained recovery.

The renewed investor interest can only be sustained through application of objective and effective risk – based regulatory standards., she said.

Tracing the market trends which threw up the urgent imperative of adopting risk based model of market oversight and regulation, Oteh observed that, “The global markets had in the two decades before the financial meltdown, recorded significant growth and dynamism. As a consequence of the growth and expansion, there emerged new markets, new intermediaries and a host of complex financial products and instruments which promoted creative financial engineering and the exploitation of new avenues of financial leveraging that were accompanied by greater risk appetite and improved information technology”. 

According to her, “during the same period, regulators on their part also saw the need to transit from the traditional emphasis on compliance with laws and rules to a comprehensive approach which dwells on the effective supervision and management of the risks associated with the new realities especially as these relate to the emerging complex institutions”.    

Oteh further recalled: “The need to effectively police the emergent complexities of the market while also ensuring the efficient allocation of supervisory resources, led regulators to seek ways and methods of identifying, measuring and mitigating the likely risks that may be posed by the advancements in market composition and transactions. The aim being to move away from the rigid rule based compliance regime to one that relies on the regulators professional assessments and discretions through the adoption of a risk based supervisory model of market regulation covering issues such as licensing, capital requirements, risk assessment and inspection methodologies.”

 

[Daily Independent]