By Allan D. Grody
June 9, 2016, FOW
Trapped by still functioning legacy systems and industry infrastructure institutions, the legacy mindset embedded in financial institutions may be providing the opportunity for Fintech companies to sweep past them. Regulators are becoming enablers.
The 'industry’ has long informed regulators as to how to improve markets by invoking the principle of 'best practices’. At the same time regulators have gone along with these best practices by accepting the principle of an industry’s 'consensus’ approval. The two principles, best practices and consensus approval has long been the way regulators obtained input from the industry and made decisions as to what regulations to implement. Incremental change was thought to be the best way forward. Then the financial crisis came along and regulators were forced to step out of their comfortable 'go along with the industry’ mode. In fact the industry, bounded in the past by sovereign regulation, was now forced to consider itself as the unbounded 'global financial industry’. This change was most apparent and traumatic in the overthecounter derivatives space where the CFTC, the minor regulator in the U.S. back then, led the charge to regulate the previously unregulated industry, and to do it at the global level.
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