Financial Regulation and Capital Flows to EMDEs

Financial regulation within Advanced Economies (AEs)  is a key driver of capital flows to Emerging Market and Developing Economies (EMDEs). This study examines specific regulatory policies that may be regarded as “regulatory frictions” in the sense that developed country or global rules may adversely affect EMDE economic development.

The topics we examine are:

  1. The treatment of EM securities in FRTB
  2. The impact on EM infrastructure loans of insurer prudential capital rules
  3. The effect of MiFID II research rules on Emerging Market (EM) investment research
  4. Regulatory constraints on EM production of Voluntary Carbon Credits (VCCs)
  5. Restrictions on the use of local Credit Ratings Agencies (CRAs)
  6. The effects on bank activity in EM securities markets from capital consolidation rules
  7. The impacts on Correspondent Banking in EMDEs of Anti Money Laundering (AML) and Know Your Customer (KYC) rules.

Our objective is to establish a set of topics deserving of further study. In each case, we provide preliminary thoughts on what could be done to mitigate the problem identified.

The last part of the report describes the architecture of regulatory policy decision-making, to identify how EMDE voices could be more influential in the design and implementation of financial regulation.

Read the full report here.

This report was commissioned by MOBILIST.