BCFSA CEO – 2025 Northwind Event Remarks - Coherence Over Uniformity: A Strategy for Regulatory Alignment

• Industry Communications

30 May 2025

Speech | Tolga Yalkin — Cambridge, May 30, 2025

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Opening – Demystifying Harmonization

Thank you. I want to take a few minutes today to demystify a concept that’s often talked about, frequently aspired to, but not always well understood—regulatory harmonization.

At its root, the word “harmony” comes from the Greek harmonia—meaning a joining or fitting together. Harmony is not unison. It’s not about uniformity. It’s about creating alignment among distinct parts so that, together, they produce something coherent, resonant, and purposeful.

In music, harmony doesn’t eliminate difference—it depends on it. Different notes, held in tension, create something richer than any single line. And while each note retains its identity—just as each jurisdiction preserves its authority—they combine to form something that works in concert.

Regulatory harmonization is no different. It’s not about forcing every jurisdiction, every regulator, every industry actor into a single mould. It’s about ensuring that, while we may operate within different structures, under different mandates, and with varying risk profiles, we are—broadly—moving toward common outcomes.

What It Is – Defining Harmonization and Its Forms

Harmonization is not one thing. It can mean:

• Coordination: The most basic level of harmonization. Jurisdictions communicate, exchange information, and seek to align their efforts, even as each retains its own rules and standards. Think of this as moving in parallel, with mutual awareness but minimal integration.
• Convergence: Jurisdictions begin to independently evolve toward similar policies, standards, or outcomes. This may not be planned, but as priorities align and good practices are shared, the space between regimes narrows. It’s less about making rules the same, and more about heading in the same direction.
• Mutual recognition: A more integrated step. Here, jurisdictions agree to accept each other’s standards or licensing decisions as effectively equivalent, even if the rules differ. It requires trust in one another’s systems and is particularly useful when uniformity is not feasible, but alignment is desirable.
• Standardization: The most advanced form of harmonization. A single set of rules, definitions, or processes is applied uniformly across jurisdictions. This demands the highest degree of collaboration, enforcement consistency, and often legal or structural alignment.

These four models—coordination, convergence, mutual recognition, and standardization—reflect increasing levels of regulatory alignment. But that doesn’t mean one is always better than another. They each serve different purposes and are suited to different contexts.

Like any model, the concepts are not perfect representations of reality—but they offer a useful way to organize complex choices and prompt better decisions.

First, not all forms of harmonization achieve alignment in the same way. Mutual recognition and convergence, for instance, are fundamentally different in practice. Mutual recognition is built on trust in the outcomes of another system—even if the underlying rules and structures differ. Convergence, on the other hand, relies on jurisdictions gradually adopting more similar approaches over time. One prioritizes confidence in equivalence; the other depends on a shared evolution in norms and methods. Both can support alignment—but through very different mechanisms.

Second, these categories are not airtight compartments—they can operate as a continuum. In real-world settings, efforts often contain elements of more than one approach. The Fair Treatment of Customers (FTC) guidance is a useful example. It reflects standardized expectations at a high level, yet jurisdictions retain discretion over how those expectations are implemented and enforced. It isn’t full standardization, nor is it loose coordination. It sits somewhere in between—blending convergence with limited elements of standardization.

Third, the best approach is sometimes a deliberate combination. As the first two points suggest, harmonization efforts don’t always follow a single model. They may draw from multiple approaches—combining coordination in one area with mutual recognition or convergence in another. A nuanced strategy that reflects both the nature of the issue and the diversity of institutional settings is often more realistic—and more effective—than trying to apply one model universally.

So, while the maturity model helps us to organize these options, it’s not a ladder to be climbed. It’s a toolkit. What matters is choosing the right tool for the job—based on the issue, the risk, and how closely jurisdictions are connected.

Depending on the situation, different forms of harmonization may be more or less appropriate. For example:

• For technical issues—like data definitions or disclosure thresholds—standardization may offer the clearest path to consistency.[1]
• For things like licensing portability, mutual recognition can strike the right balance between autonomy and shared confidence.[2]
• In areas where jurisdictions are already moving in similar directions—like consumer protection—convergence may be the right goal.[3]
• And for emerging or fast-changing topics, such as cyber incident reporting, coordination may be the right place to start.[4]

Like any model, the maturity framework is a simplification. It doesn’t capture every nuance, but it offers a useful lens—a way to approximate reality, prompt the right questions, and support more deliberate choices.

When It Makes Sense – Choosing the Right Level of Harmonization

Before we explore why harmonization matters or how it works in practice, it’s important to consider how we determine which level of harmonization may be appropriate for a given issue. Not every topic lends itself to the same approach. A structured assessment can help guide decisions on whether coordination, convergence, mutual recognition, or full standardization makes sense.

Here are five guiding considerations for determining the right level of harmonization:

• Nature of the issue: Is the topic technical and rule-based, or broad and value-driven? Technical areas—like solvency metrics or product classifications—may suit standardization, while more interpretive ones—like licensing—may fit mutual recognition or convergence.
• Opportunity for industry efficiency or clarity: Will harmonization reduce complexity or improve consistency for firms operating across jurisdictions? Where expectations diverge, more advanced forms of harmonization can lower compliance costs and improve service.
• Shared understanding of risk: Does the issue pose significant consumer or systemic risk if left unaligned? The case for deeper harmonization grows with potential harm—but only if jurisdictions share a common view of the risk. Without that, alignment is unlikely to follow.
• Variability in current practice: How differently do jurisdictions currently approach the issue? Where divergence is wide, early-stage coordination or convergence may be more practical than immediate alignment.
• Institutional readiness and trust: Do jurisdictions have the governance structures, technical capacity, and mutual confidence to sustain harmonization? The more mature and trusting the relationship, the more feasible deeper alignment becomes.

These considerations can help shift the conversation from preference to judgment. They remind us that harmonization is not a one-size-fits-all concept—but a toolkit. And like any toolkit, its value lies in knowing which instrument to use, when, and how.

First, different considerations carry different weight depending on the form of harmonization being pursued. For example, institutional readiness and trust are especially critical for convergence, where jurisdictions must evolve together over time. Standardization, by contrast, places a greater premium on legal authority and structural alignment. Recognizing which factors matter most to each model helps ensure our approach is well-calibrated—not just in principle, but in execution.

Second, not all conditions are equally malleable. Some—like legislative mandates or governance structures—are deeply embedded and slow to change. Others—such as engagement, scoping, or terminology—can often be adjusted more quickly. Knowing where we can move, and where we can’t, helps us focus energy where progress is possible.

Third, even the considerations themselves can carry tension. Shared understanding of risk, for instance, can be fraught—especially when regulators face different pressures or interpret issues through different lenses. Similarly, variability in practice isn’t just a technical hurdle; it’s often rooted in long-standing systems, internal culture, and institutional investment. Harmonization isn’t difficult because it lacks value—it’s difficult because it asks us to reconcile differences that are both operational and deeply human.

What It Takes – Conditions for Success

So, what makes harmonization succeed or fail?

Much of it comes down to how clearly the initiative is defined, how appropriately it is scoped, and how well it is executed. Harmonization is not simply a matter of aligning policy—it requires intention, collaboration, and strong design.

From experience, six key conditions consistently underpin successful efforts:

• Clarity of purpose: Define the specific problem harmonization is meant to solve and who it’s meant to benefit. Is the goal improved consumer protection, better market access, or regulatory efficiency? Without a clear, shared objective, efforts risk fragmentation or drift.
• Appropriate scope: Focus harmonization on the part of the system where alignment will deliver real value. If scoped too broadly, it becomes unmanageable. If scoped too narrowly, the benefit may not justify the cost. Effective harmonization targets tangible outcomes.
• Stakeholder engagement: Involve regulators, industry, and other key actors early. This surfaces operational realities, builds trust, and improves design. Harmonization cannot be imposed—it must be co-developed to succeed.
• Trust and transparency: Especially critical in models like mutual recognition, where jurisdictions rely on one another’s systems. Sustained alignment depends on transparency, communication, and mechanisms for assurance.
• Implementation planning: Successful harmonization doesn’t stop at agreement. It requires phased timelines, clear responsibilities, and operational infrastructure. Strong policy design must be matched by strong delivery.
• Respect for structure: Jurisdictions have distinct legislative mandates and oversight models. Effective harmonization works within these boundaries—it does not seek to override them. Respect for institutional roles is a foundation, not a barrier.
• Mechanism for review: Harmonized frameworks must remain relevant. Periodic evaluation ensures they continue to serve their intended purpose as markets, technologies, and consumer expectations evolve. Without built-in mechanisms for review and refinement, alignment can become a source of rigidity rather than clarity.

Reflections on Maturity – When Execution Gets Harder

With these conditions in hand, we can better match our ambition to our capacity. As harmonization efforts move toward more integrated models, the demands for clarity, trust, planning, and coordination increase. Recognizing this helps ensure we don’t just choose the right model—but prepare to implement it well.

Here’s how these levels relate to these conditions:

• Coordination: Involves minimal structural change. Success relies on clarity of purpose and appropriate scope—ensuring efforts are targeted and purposeful. Goodwill, communication, and a shared sense of direction may be sufficient at this level.
• Convergence: Demands iterative learning and increasing alignment over time. Planning, benchmarking, and trust-building are central to building momentum without forcing uniformity.
• Mutual Recognition: Requires high levels of trust and transparency. Stakeholder engagement becomes critical, as jurisdictions must have confidence in each other’s systems. Mechanisms for assurance, monitoring, and information sharing are essential.
• Standardization: Requires the full set of enabling conditions—clear purpose, appropriate scope, deep stakeholder engagement, robust governance, and detailed implementation planning. At this level, every condition becomes critical; weakness in any area can jeopardize success.

In short, the more integrated the model, the more tightly these success factors must operate in sync. Harmonization doesn’t just get harder—it gets more dependent on our ability to execute all aspects well, though the benefits can be significant.

Looking Ahead – A Shared Opportunity

Recognizing the complexity of harmonization should not lead us to abandon it—it should compel us to approach it more intelligently. The opportunity ahead is not to force uniformity, but to build coherence. Coherence in how we protect consumers. Coherence in how we enable innovation. And coherence in how we earn public trust.

To do that, we must start asking ourselves some hard questions:

• Where are we duplicating effort, with little additional benefit?
• Where are consumers getting inconsistent experiences that diminish trust in the system?
• Where are we demanding complexity from industry that doesn’t correspond to risk?
• And where could we align—not just because we can, but because it would tangibly improve outcomes?

These aren’t rhetorical questions. They are invitations to be more deliberate. They demand that we scope problems well, assess maturity realistically, and execute with rigour.

Closing – A Call to Action

What this moment calls for is not just momentum—but discernment.

If we are to make real progress, we need more than broad appeals to harmonize. We need a thoughtful conversation—one grounded in clarity of purpose, a shared understanding of context, and a willingness to navigate complexity. Harmonization, when pursued well, can create coherence and improve outcomes. But it is not a goal in itself but a means to an end.

It requires us to be clear-eyed about where alignment strengthens outcomes—and where variation reflects legitimate structure, history, or purpose.

It asks us to move past abstractions and into the specifics: What kind of harmonization? For what reason? And under what conditions?

This is the conversation we need—one shaped by sharper questions and a shared willingness to listen carefully to one another. Like harmony, achieving coherence depends not on everyone playing the same note, but on attunement—on hearing what others bring, and finding the structure that lets it work together.

Thank you.