Turning now to the final item in my catalogue of major changes, the relationships between regulators and governments are changing: though not all these changes are in the same direction.

In many of the major economies governments, hoping to control systemic risk in the financial services sector, have ceded powers to regulators.

So regulators that have previously been endowed with what were seen as “purely technical” powers of micro-prudential regulation are now required to take the highly politicised decisions that the macro-prudential regulation of systemic risk demands. The tentative steps being taken by Financial Policy Committee of the Bank of England, for example its reluctance to assume the power to regulate loan to value ratios in the mortgage market, indicate the Committee’s awareness that this could be a political minefield.

As far as Jersey is concerned developments are, if anything, moving in the opposite direction.

Whilst the Government here in Jersey remains committed to the independence of the JFSC, it is seeking a closer relationship with the regulator in the furtherance of its economic goals. This is essentially a “Jersey plc” approach, and is the rational response to the issues facing a small, highly specialised jurisdiction.

The key problem to be solved is how to manage the development of financial and regulatory policy in a coherent, mutually supportive manner. And this doesn’t just involve the Government and the Commission, it involves Industry too – a matter I will return to later.

Suffice to say that discussions are underway to create a transparent framework for the mutual consideration of regulatory policy in a more effective manner than has typically been the case in the past – recognising the differing responsibilities of government and regulator, and, of course, the ultimate responsibility of the Government for the well-being of the Island.

Characteristics of an accomplished regulator

The scale, scope and pace of all these changes, and the risks and opportunities embodied in them, pose serious challenges for the JFSC, particularly in the context of the limited resources available in a small jurisdiction.
I will deal first with how the JFSC plans to meet these challenges, and then turn to concrete examples of what it will actually do.

I believe that the challenges we face will require that the Commission, if it is to be an accomplished regulator, must be a thinking regulator, an agile regulator, and therefore an inquisitive regulator.

A thinking regulator is a regulator that actively confronts the prospective challenges posed by change. The Commission has, in the past, been rather overly devoted to examining the success or otherwise of its past operations. This is, of course, necessary, since lessons are learned from the past. But too much time spent examining the past and too little devoted to future challenges and to speculative argument, does not make for a Commission that can provide the adaptive environment in which Industry can make the most of the opportunities that changing financial circumstances present.

It is this “thinking” approach that is necessary if the regulator is to be agile.

It is inevitable in an innovative industry such as financial services that even a successful regulator is 10 metres behind the market in a 100 metre race. The point is not to fall even further behind.

The goal should be to understand the significance of new developments, and decide on an appropriate, well-founded response within a reasonable period of time.

It is not the task of the regulator to be a financial entrepreneur, or to attempt to guide innovation – though the regulator may have an important part to play in thinking through policies that aid market development. It is one of the key tasks of the JFSC to provide a regulatory environment that is conducive to those innovations that serve the best economic interests of the Island – put simply, growth and jobs.

To be thinking and agile the JFSC must be an inquisitive, outward-looking regulator serving an outward-looking Industry – and therein lays a dilemma.

The Commission simply does not have the resource, and given the size of the jurisdiction, cannot have the resource, that enables it to pursue a significant research agenda within the Commission itself.

So what is absolutely necessary is that the senior executive team identify and engage with creative thinkers throughout the international regulatory community, leverage the work of others, and focus it through the lens of the needs of Jersey. The Board has its role to play too. The Board must be composed of individuals who bring a wide range of experience and analytical skills to the Commission, and they must be prepared to be agile, to learn.

Read The Full Speech – http://bit.ly/1r0kOS2