Monday, July 20, 2009

Are our regulatory agencies adequately china-walled against conflicts of interests?

The recent Auditor General's audit thrashing of the MDA (Media Development Authority) and today's report on the MAS's (Monetary Authority of Singapore) management of the financial institutions re-awoke that niggling feeling in me that there is something not quite right about the way our regulatory agencies are structured.

You see, most of our regulatory agencies serve at least two masters - one that is promoting the industry and the other protecting the public. Some agencies are more of one than the other. This duality of mission creates an immediate conflict of interest within the agency's decision making process. If it single-mindedly protects the public, it may over-restrict the activities of the industry, and possibly destroy it. On the other hand if it is over-friendly to industry, it will clearly compromise its role in protecting public interests.

One common refrain heard is that Singapore is very small and we have limited expertise, and therefore often the same bigwigs sit on committees serving regulatory as well as promotional roles.

The question therefore is how do we ensure that public interests are actually being looked after, and not held to ransom by big industrial interests.

In MAS's situation, how does the agency balance public interest against the interests of the the big financial insitutions? How does MDA balance the consumer needs with the mission to please the industry? How does the AVA protect us with respect to industrial poisons, without compromising big business' interests and possibly losing industrial investors?

Closer to home, how does the HSA protect medical consumers without losing big pharma investments for our biomedical initiatives?

In short, what has never been very clear is if the decision making processes in our regulatory agencies are adequately china-walled against all these conflicts of interests?


auntielucia said...

Giga, I don't know abt the othger agencies but MAS really did a decent job for the so-called victims of the exotic financial products. Indeed, many of those who were compensated had actually signed acknowledgements of understanding what they bought. But FI's in line with MAS' moral suasion, decided not to be overly legalistic abt the issue.

The real moral of the Lehman fall-out is that when dealing with money, investors must always remember, the higher the yield, the higher the risk and that there's no free lunch. Caveat emptor shld be their mantra.

Lastly, it's all very well to speak abt separating the regulatory role fm the promotion role in a vacuum... but reality is that it really takes a thief to catch a thief! ;)

gigamole said...

I don't think the MAS necessarily did badly in handling the FIs....I actually don't have a lot of sympathy for the investors. And yes, caveat emptor applies.

But the lack of separation of promotional and regulatory roles can get quite conflicted. Even if the MAS did act in good faith, it opens them up to criticisms that they may have favoured the big muscled FIs over the small investors.