Beyond borders: Regulating the risks we share

This post was originally published on fca.org.uk 

International cooperation

But for the kind of horizontal risks I’ve mentioned today, domestic coordination alone will not cut it. 

We have to look beyond our own backyard, using domestic coordination and international collaboration to reinforce one another. 

I believe that it would be irresponsible to shy away from a challenge which honours Mike Gill’s internationalist values.  

Because if the risks are horizontal and global, our response must be too.

This is not about trade wars, spheres of influence or the other markers of geopolitics which capture the headlines.  

In my view, there are three main varieties of global cooperation among regulators, only one of which can transcend political considerations.  

First, multilateral standard setting. That’s hard at this juncture. Even the post-crisis reforms were vulnerable to inconsistent local implementation – or none at all.  

Second, bilateral mutual market access agreements. These face strong headwinds compared to a few years back, when Chris and Mike were such strong advocates of regulatory recognition to underpin cross-border investment.  

That leaves supervisory cooperation. How we manage risks arising in global wholesale money flows, global retail payments systems and globally active financial services. 

The issue we now face is how this type of cooperation can address the severe risks to financial firms, markets and infrastructure which increasingly originate outside the domain of financial regulation.  

I would suggest three things. 

First, continuing to build a shared picture of risk. 

IOSCO’s I-SCAN network is a good example. 

At the FCA we have received reports from consumers about certain entities appearing in our markets.  

Thanks to warning alerts by overseas regulators on I-SCAN, we’ve been able to confirm that those entities are not authorised and warn consumers accordingly. 

Intelligence gathered in one market, directly helping protect others. 

By building on this kind of genuine, practical activity, we can do more to identify cross-border scams faster, and protect consumers, firms and our markets more effectively. 

The same principle can apply to emerging opportunities. 

The FCA is working with the Monetary Authority of Singapore to develop tools to support safe, responsible AI adoption.  

And through the Global Financial Innovation Network, we’re leading work on a quantum toolkit due to be launched next month. 

The toolkit draws together insights from 25 members, including US regulators, into something greater than the sum of its parts. 

By learning together in this kind of way, we can make progress more quickly and with greater confidence than any of us could on our own. 

Of course, the extraordinarily rapid emergence of agentic AI risks takes the importance of this to a whole new level.  

Second, we need to test together. 

Firm-level stress tests are important, but system-wide risks cannot be understood through isolated firm exercises. 

Military allies run joint exercises to test their readiness in the face of threats.  

Just last month, the UK and US successfully launched a torpedo from an uncrewed underwater drone for the first time. A breakthrough in our efforts to protect critical subsea infrastructure, like the cables on which the global economy depends.

So if financial stability is part of national security and resilience – which I think we all agree it is – it’s right that we apply the same principles. 

Earlier this year, the UK participated in a cyber crisis simulation exercise with fellow G7 countries to test how we would coordinate during a major cross-border incident.  

We should step up that effort, regularly testing scenarios that cross borders, sectors and supply chains: a major cyber attack, a cloud outage, a disruption in digital money. 

And those exercises shouldn’t be limited to just policymakers; they should include financial firms, market infrastructure and critical third parties where relevant too. 

Finally, third: we need to be ready to act together. 

The midst of a crisis is the worst time to discover that our data sets cannot speak to one another, or to be hastily trying to resolve legal barriers.  

Shared intelligence and joint exercises only take us so far; we also need the mechanisms in place that will allow authorities to move quickly if and when a threat materialises. 

Legal gateways. Data-sharing standards. Crisis protocols. 

Project Aperta, a BIS Innovation Hub Hong Kong project, is one example of the kind of thinking needed: building a prototype showing how different countries could connect their Open Finance systems, allowing data to be shared safely across borders. 

This is the sort of practical infrastructure an interconnected system like ours needs.  

Not cooperation for its own sake – real collaboration to ensure that, when it really matters, we’re ready.