Magoosh GRE

Future of International Finance Regulation

| May 13, 2012 | 0 Comments

The Dilemma:

  • There is no formal unified system of international finance regulation.
  • Despite this these transactions happen every day, cross-border business transactions – the basic legal dispute regarding the transactions with international characteristics is the issue of the applicable law.
  • This is generally governed by international treaties which takes precedent over national laws in a time of dispute.

The G20 Summit meetings seem to be persevering in a united norm system for international finance.  This system of ‘softlaws’ between national financing institutions entering into international treaties.

 

The trend from the G20 is as follows:

1) Global standards (most binding ones, applicable to all countries- related to accounting standards and principles).

2) Internationally-agreed norms (subject to separate agreements – financial system regulation).

3) Good practice (desirable, recommended – activities of credit rating agencies).

(4) A consistent approach (most flexible – basic principles of national financial regulation, for example, coverage and boundaries).

The core part of this focuses on strengthening of financial supervision and regulation. In order to secure a much greater consistency and systematic co-operation, a new international body (Financial Stability Board) should be established. It would encompass a wider membership and work closely with the International Monetary Fund (IMF) to provide early warning of macroeconomic and financial risks.

 

Think how this relates to the recession and the significance thereof!

The G20 Summit in London brought about TWO significant changes:

  1. G20’s role as the centre forum for the creation of new international economic architecture.
  2.  The reform of leading intergovernmental financial institutions in terms of fairer distribution of voting powers.

At the 2010 Toronto Summit THREE changes were brought with rules aimed at:

  1. Balanced economic growth
  2. Financial sector reform
  3. Development of international financial institutions.

The analysis of the mentioned FSB reports on efforts to build new financial regulation could lead to a conclusion that hardening of the soft-law[1] regime is the way towards a future international hard regulation.

 

 

 


[1] Soft-law is a ‘contract’ type arrangement between states concluded by a treaty. Converting it to hard-law essentially is the idea of it becoming binding by international standard e.g. a convention.

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Category: Essay & Dissertation Samples, Finance Essay Examples

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