Effective Governance of Global Financial Markets: An Evolutionary Plan for Reform

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Abstract

Two questions remain widely open when it comes to global financial markets. First, what is the raison d’ etre of open global markets? Second, is it possible to foster open global markets without an International governance structure assigned the task of supervising them?Post-crisis regulatory reform presents an acute paradox. While the content of regulation is changing rapidly and in encouraging ways, the reform of governance structures is painfully slow. There is no formal governance structure dealing with cross-border supervision of big financial institutions. In addition, there is no crystalized institutional capacity at the International level dealing with cross-border crises and the resolution of global financial institutions. Other areas of concern are the global supervision of systemic risk, especially of risk originating in the opaque shadow banking markets, and the absence of a reliable finance research watchdog dealing with the production of regulatory standards. This article outlines an International governance framework to deal effectively with these concerns. Adoption of the proposed plan would lead to breaking down the territorial link in the supervision of systemic risk and of certain kinds of financial institution, without causing intolerable loss of sovereignty. In addition, the proposed structure is based on a set of explicit values. These can provide a strong signal to global markets that they ought to shift focus from speculation to development.
Original languageEnglish
Pages (from-to)74-84
JournalGlobal Policy
Volume4
Issue numberSupplement 1
DOIs
Publication statusPublished - 2013

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