By EMILYN YAP

Financial reforms proposed by US President Barack Obama may be stirring hot debate in the US, but the response from the industry here has been cool - so far. Players are waiting for details to emerge, while some observers are sceptical about whether more regulation will be effective.

'For financial institutions, the rules appear a bit vague at the moment,' said a senior banker in Singapore. For instance, one key recommendation involves the creation of a Financial Services Oversight Council - to identify emerging risks and companies whose failure would threaten financial stability.

'How does the 'new systemic risk regulator' go about watching for signs of trouble in the financial system?' the banker asked. 'How will these early signs be identified and monitored?'

The proposed reforms also reminded some market watchers of regulations in the US that have come - and duly gone. Aberdeen Asset Management Asia's Asia strategist Peter Elston cited the repeal of the Glass-Steagall Act 10 years ago.

The Act was introduced after bank failures in the 1920s and '30s, to prevent financial institutions engaging in deposit-taking and securities businesses at the same time. It was eventually scrapped after massive lobbying by banks. People have 'short memories', Mr Elston said.

Regulations - even if there are more of them - are also not foolproof. Organisations will 'look for ways to arbitrage regulations', the banker pointed out. For instance, according to him, banks made use of Qualifying Special Purpose Entities (QSPEs) to 'put on' more assets and circumvent rules under the Basel I framework.

RBS regional strategy analyst Andrew Orchard reckons some recommendations would also be hard to push through. Setting guidelines for executive compensation in the financial sector, for example, could drive talent to other industries or even other countries, he said.

Still, some observers see merit in certain recommendations. Some would like increased oversight of the insurance sector, hedge funds and other private pools of capital.

According to the banker, the overall financial system could become more secure because firms that were outside the banking regulatory framework would also come under scrutiny.

NetResearch Asia head Kevin Scully said in his blog that Singapore should also create a regulator with far-reaching powers 'to help restore investor confidence in the wake of the number of corporate fraud cases and financial product mis-selling'.

Aberdeen's Mr Elston said Asian regulators will be watching developments in the US closely but may not see the need to change many rules as the region largely avoided the current financial crisis.

This article was first published in The Business Times.