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C.H. Montin, Ankara 12 May 2014 11 Ankara, 12 May 2014 Further techniques to improve the design of...
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Transcript of C.H. Montin, Ankara 12 May 2014 11 Ankara, 12 May 2014 Further techniques to improve the design of...
C.H. Montin, Ankara 12 May 2014 11
Ankara, 12 May 2014
Further techniques to improve the design of legislation
Charles-Henri Montin, Smart Regulation Consultant
Former Senior Regulatory Expert,
Ministry of economy and finance, Paris
http://smartregulation.net
For the full presentation (19 slides), contact speaker
C.H. Montin, Ankara 12 May 2014 2
Contents: three more tools
Considering “alternatives to regulation” during the policy making phase
Introducing risk management into regulatory design
Conducting International Regulatory Cooperation
C.H. Montin, Ankara 12 May 2014 3
ALTERNATIVES TO REGULATION
Why explore alternatives to regulation ? the first response by governments to a perceived
policy issue is often to regulate, but it may be appropriate to ask whether traditional regulation is the best possible course of action. In many situations there may be a range of optional policy instruments other than traditional ’command and control’ regulation available.
C.H. Montin, Ankara 12 May 2014 4
A range of options
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Alternatives in the policy making process
OECD 1995 checklist recommends carrying out “an informed comparison of a variety of regulatory and non-regulatory policy instruments, considering relevant issues such as costs, benefits, distributional effects and administrative requirements".
RIA procedure includes a phase of checking the impact of alternatives, to regulate when it is the only effective solution.
C.H. Montin, Ankara 12 May 2014 6
Pros and cons of alternatives
Smaller corpus of legislation
Assist simplification drive Lower administrative
burdens Better knowledge of
factual situation (sometimes)
Lack of knowledge and practice of A.
Difficult to measure impacts of A.
Symbolic value and credit of regulation (authority)
Risk to uniform implementation
Bureaucratic obstacles Fear of uncertainty of rules
made by others
C.H. Montin, Ankara 12 May 2014 7
Practice of alternatives
The use of A. must be a component of the explicit regulatory policy
Need for research into foreign best practices likely to succeed in the country
Emphasis on avoiding excessive regulation focused on economic sectors; systematically include alternatives in RIA process
Sensitise industry sectors to potential of standards
Need for a change of culture in the policy making circles of government
C.H. Montin, Ankara 12 May 2014 8
RISK AND REGULATION
Some concepts Risk: a combination of probability of a hazard and
magnitude of consequences Hazard: situation that could lead to harm Risk analysis Precautionary principle Administrative certainty and security Risk management Risk based regulation
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Definition of risk based regulation
Range of meanings
(1) Regulation of risks to society
(2) Loose collection of approaches expressed terms of risk
(3) In banking and insurance regulation, the use of firm’s own internal risk models to set capital requirements
(4) Systematised decision making frameworks and procedures to prioritise regulatory activities and deploy resources, principally relating to inspection and enforcement, based on an assessment of the risks that regulated firms pose to the regulator’s objectives
Definition (4) is that used here
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Key issues in design
Approaches taken to risk tolerance The choice between objective and subjective
indicators The relative roles of impact and probability The role of weighting Integrating broader external risks with firm level
risk assessments Dealing with ‘bulge’ –the low risk firms which are
usually the majority of the regulated population
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Lessons from OECD experiences
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The risk cycle in policy making
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Main elements of risk based regulation
Setting the risk tolerance Risk identification and risk assessment Assigning scores and ranking firms or sites Linking supervisory resources and responses to
the risk scores.
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International regulatory cooperation (IRC
Definition: any agreement or organisational arrangement, formal or informal, between regulators (at the bilateral, regional or multilateral level) to promote cooperation in the design, monitoring, enforcement of ex-post management of regulation. Goes beyond adherence to international legal obligations. Can use non-binding instruments
Enshrined in principle 12 of OECD 2012 Recommendation
Best practice: US, Canada
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11 varieties of IRC
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Practicing IRC
Research into foreign regulatory solutions, with emphasis on neighbouring countries
Networking, including personal contacts, with colleagues with same mission in other countries
Formal cadre for conducting cooperation can be required
Bringing the right spirit to sharing experiences and solutions
Filtering IRC feedback into national regulation for convergence or harmonisation
Particularly useful for business related regulation
C.H. Montin, Ankara 12 May 2014 171717
To continue the study…
Alternatives: http://www.oecd.org/gov/regulatory-policy/42245468.pdf
Risk: http://www.oecd.org/gov/regulatory-policy/riskandregulatorypolicy.htm
IRC: http://www.oecd.org/gov/regulatory-policy/irc.htm Further questions contact:
• montin @ smartregulation.net