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Bloomberg hosts virtual COVID-19 dialogue with Ashley Alder


On June 11, Bloomberg held an exclusive virtual dialogue: COVID-19 Impact and regulatory priorities, with Mr Ashley Alder, Chair of the International Organization of Securities Commissions (IOSCO) and CEO of the Hong Kong Securities and Futures Commission (SFC). The discussion covered the impact of COVID-19, IOSCO’s responses and global regulatory priorities, and the measures that the SFC took to manage the crisis, while ensuring that markets operate efficiently and fairly under extraordinary conditions. He also shared his perspective on the capital market and regulatory outlook in Hong Kong, across APAC and the rest of the world.

Mr Alder said that Hong Kong’s response to the pandemic has been impressive, and noted that the make-up of Hong Kong’s capital markets, both in terms of investors and corporates, is highly international. Together, this meant that Hong Kong’s markets did not suffer the same levels of volatility as those in the US and Europe, and the overall stability of the wider financial system was never seen to be at risk.

While the complexity of issues faced by regulators has been unprecedented, he said that Hong Kong’s quick response to the virus, leaving the city with relatively low infection and fatality rates, helped prevent the health crisis becoming a serious financial crisis.

The SFC took immediate steps to adapt to the new operating environment for firms and to ensure that exchanges and markets were sufficiently resilient. However, the situation is still fluid, with Mr Alder noting “the degree to which we will go back to normal remains a question mark.”

On more general economic issues, he noted that the Hong Kong Dollar’s peg to the US Dollar remains “extremely robust”, despite speculation to the contrary, and there had not been any significant signs of capital flight.

However, despite the current calm state of markets worldwide, as Chair of the IOSCO Board, Mr Alder notes that regulators worldwide continue to work hard on pandemic-related concerns. “Many individuals across the countries affected are anxious and many of them are severely financially stressed. Similarly, many financial sector firms – especially small to medium sized firms – are equally stressed. That leads to a potentially toxic mix around conduct, including risks of exploitation of more vulnerable consumers,” Mr Alder said, before adding that it is impossible to predict with complete accuracy what the future will hold, particularly given the high potential for geo-political threats to increase overall risks.

In a global financial system that was already susceptible to vulnerability, this black swan event could be a tipping point for the global economy. Mr Alder pointed out that what we saw in March was a “liquidity crisis,” while May and June have been “eerily quiet.” A particular concern now is whether the global economy may be facing a major insolvency problem. Over the next few months, one key focus of regulatory priorities will be solvency risks of highly indebted corporates that have been hit hard by the COVID-19 pandemic. For now, the measures that have helped numerous businesses stay afloat during a period of unprecedented stress remain largely in place.

Globally, IOSCO members aimed at ensuring markets remained open and resilient as COVID-19 continued to spread. This was vital to ensure that funding could still flow to the real economy. Many of the measures implemented by them are also likely to stay in place for the foreseeable future.

On the global regulatory agenda, Mr Alder said “There will be no rollback of regulatory reforms.” While regulators may use the flexibility built into the post-GFC reforms as appropriate, he did not see there being any changes in the fundamental direction.

Mr Alder also warned against thinking that global markets are already in recovery phase, noting “A lot has been said about a recovery phase, but I do not believe that we are anything close to this.” He said that continuing co-operation and co-ordination between regulators would be key to addressing the issues caused by the health crisis.

As for Hong Kong’s role in a post COVID-19 world, Mr Alder said the SFC’s focus would be on ensuring the financial markets continued to function in line with international standards, notwithstanding the operational and other difficulties experienced during the crisis.

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