Global standards should be developed to determine the amount of capital that insurance companies and securities firms must hold against potential market losses, in the same way they have been for banks, regulators for the banking, insurance and securities sectors said in a report Friday.
These standards, which would be designed to be implemented by national regulators, must also be harmonized as much as possible across the three sectors so similar activities in each are regulated in the same way, said the report from the Joint Forum.
This body was set up to deal with common regulatory issues across the world's banking, securities and insurance industries.
"It is the Joint Forum's view that the lack of a uniform global standard for capital adequacy within each sector can contribute to regulatory arbitrage, competitive inequalities across jurisdictions and, in some cases, financial system instability," the report said.
The Joint Forum said in the report that it believes the lack of uniform global capital standards allows companies to take advantage of countries or market sectors with the lightest regulations, a process known as regulatory arbitrage, which represents a threat to financial stability.