An international body representing securities commissions has released a new set of principles of securities regulation that incorporate lessons learned from the global financial crisis and recent changes in the regulatory environment.

The principles are an agreed set of high-level global standards that outline the basis of an appropriate, effective and robust securities regulatory system and are used by the International Monetary Fund and the World Bank.

The revised publication of the International Organisation of Securities Commissions’ (IOSCO) Objectives and Principles of Securities Regulation includes eight new principles, two of which address systemic risk in markets.

Principle 6 says the regulator “should have or contribute to a process to monitor, mitigate and manage systemic risk appropriate to its mandate”, while Principle 7 says the regulator “should… contribute to a process to review the perimeter of regulation regularly”.

NZ Securities Commission and IOSCO Executive Committee Chairman Jane Diplock says “traditional economic orthodoxy has considered systemic risk to be only a matter for prudential regulators”.

“The financial crisis has shown us that financial stability depends on both of the virtuous twins of effective market regulation and effective prudential regulation. Therefore markets matter for the identification and management of systemic risk, and the new IOSCO principles… recognise the vital importance of this concept.”

Madrid-based IOSCO is charged with promoting high standards of regulation to maintain just, efficient and sound financial markets.