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The Governance of Regulators Cheat Sheet by

governance     oecd     regulators


The OECD Best Practice Principles for the Governance of Regulators frames the governance arrang­ements of regulators in order to provide greater confidence that regulatory decisions are made on an objective, impartial and consistent basis, without conflict of interest, bias or improper influence, as described in the 2012 OECD Recomm­end­ation of the Council on Regulatory Policy and Govern­ance.

This set of principles details the key consid­era­tions for establ­ishing and operating regulatory agencies. It also provides more detailed issues that should be reflected upon to apply the principles to different cultural and political contexts.

This OECD public­ation has an informal status of guidance approved by the Regulatory Policy Committee and the OECD Network of Economic Regula­tors. It can be used by member and non-member countries to guide their reforms and as a set of criteria for evaluation of regulatory agencies.

1. Role clarity

For a regulator to understand and fulfil its role effect­ively it is essential that its objectives and functions are clearly specified in the establ­ishing legisl­ation. The regulator should not be assigned objectives that are confli­cting or should be provided with management and resolution mechanisms in case of conflicts. The legisl­ation should also provide for clear and approp­riate regulatory powers in order to achieve the objectives and regulators should be explicitly empowered to co-operate and co-ord­inate with other relevant bodies in a transp­arent manner.

2. Preventing undue influence & mainta­ining trust

Indepe­ndence from the government and from the industry that is regulated can improve the regulatory outcomes by allowing the regulator to make decisions that are fair and impartial. It is important that regulatory decisions and functions are conducted with upmost integrity to ensure that there is confidence in the regulatory regime. This is even more important for ensuring rule of law, encour­aging investment and having an enabling enviro­nment for inclusive growth built on trust. This requires a proactive approach to regulating that is accessible by regulated entities and yet within the national strategic priori­ties.

3. Decision making and governing body structure

Decision making and governing body structure for indepe­ndent regula­tors. Regu­lators require governance arrang­ements that ensure their effective functi­oning preserve its regulatory integrity and deliver the regulatory objectives of its mandate. The governing body structure of the regulator (e.g. a single head or a board of directors) should be determined by the nature of the regulated activities and their motiva­tion. The membership of the governing body should also protect from potential conflicts of interest or influence from the political process and should be ultimately for the public interest.

Governance of Regulators

4. Accoun­tab­ility and transp­arency

Businesses and citizens expect the delivery of regulatory outcomes from government and regulatory agencies and the proper use of public authority and resources to achieve them. Regulators are generally accoun­table to three groups of stakeh­olders: i) ministers and the legisl­ature; ii) regulated entities; iii) the public. The expect­ations for the regulator should be published and regulators should regularly report on the fulfilment of their object­ives, including through meaningful perfor­mance indica­tors.

5. Engagement

Good regulators have establ­ished mechanisms for engagement with stakeh­olders as part of achieving their object­ives. The knowledge of regulated sectors , businesses and citizens affected by regulatory schemes assists to regulate effect­ively. Regulators should also regularly and purpos­efully engage with regulated entities and other stakeh­olders to enhance public and stakeh­older confidence in the regulator and to improve regulatory outcomes.

6. Funding

The amount and source of funding for a regulator will determine its organi­sation and operat­ions. It should not influence the regulatory decisions and the regulator should be enabled to be impartial and efficient to achieve its object­ives. Funding levels should be adequate and funding processes should be transp­arent, efficient and simple.

7. Perfor­mance evaluation

It is important that regulators are aware of the impacts of their regulatory actions and decisions. This helps drive improv­ements and enhance systems and processes intern­ally. It also demons­trates the effect­iveness of the regulator to those it is accoun­table toward and helps to build confidence in the regulatory system. The regulatory decisions, actions and interv­entions of the regulator should be evaluated through perfor­mance indica­tors. This creates awareness and unders­tanding of the impact of the regula­tor’s own actions and helps to commun­icate and demons­trate to stakeh­olders the added value of the regulator.

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