IOSCO Reports On Risk Identification And Assessment Methodologies
On June 26th, the International Organization of Securities Commissions (IOSCO) published a report on the methods, approaches and tools that securities regulators have developed to identify and assess emerging and potential systemic risks. Because securities markets are complex and involve a wide range of features, there is no “one-size-fits-all” method for the identification of trends, vulnerabilities and risks in securities markets. In fact, a review of the implementation of the IOSCO Objectives and Principles found that less than 20 percent of securities regulators surveyed have a legally-imposed definition of systemic risk. Most securities regulators based their implementation of related regulation on a “working definition” of systemic risk appropriate to their mandate and domestic market, rather than on a statutory definition. As a result, the report states that securities regulators should consider adopting a more specific definition of systemic risk because it would allow them to have a clearer idea of how to best identify a risk that is relevant to the markets it regulates. The report provides the following definition of risk, which casts a wide net to capture new and emerging risks as well as risks to the mandate of the securities regulator:

Risks, including potential emerging and systemic risks, in financial market, entities, infrastructures, products and activities which may impact the ability of the securities regulator to meet its regulatory objectives as set out in [relevant rules and regulations/regulatory objectives].
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