TRANSNATIONAL REALITIES ABOUT FINANCIAL INSTRUMENTS' MARKETS AND SYSTEMIC RISK MEASUREMENT

We know about the difficulties encountered in the stress-test process of the banks and the disputes between monetary surveillance agencies. We also stated that, with the lack of M5 and M6 information, agencies will again not be able to appraise systemic risks and will again be subject to failure as they were in 2007. Figures are not a jurisdictional or legal issue. They are first an information issue which attempts to be resolved, but overall are a political issue that agencies will never be able to deal with. This is the first issue leading to the conclusion that the FSB, conceptually the only possible forum, cannot be the solution without being supported by an international treaty that does not yet exist.

The second issue is that M5, M6 and their derivatives-only figure aggregates are not sufficient unless grounded by legal systems for the execution of instruments, resolution of bookkeepers and depository status precise accountability definitions (see Chapter 6 covering M5/M6 and M57M6'). This includes the allocation between nations of regulation and surveillance powers when not held by international bodies with such power. From the allocation of regulation and surveillance also derives the allocation of tax liability determination, especially in the intangible fields of digital and financial industries.

This allocation is not organized or, if organized, no longer effective and does not exist yet besides the special European set-up that we have discovered with the ongoing integration of the euro monetary zone. However, it is a national allocation within the EU and not an international one. Its relationship with the US dollar zone and other zones only goes through the FSB, with no legal power whatsoever. The postal treaties, sea or train transportation of past centuries are of limited scope compared with the scope of modem exchanges to be addressed in the financial sphere.

We believe that agency staff are in the same position, approaching classification and measurement of financial instruments. They try to give guidance about their valuation, but they operate within their jurisdiction, which is by nature a national one. By nature, financial markets are national, as instruments are. Financial markets being national, where registered, they are under the jurisdiction of one country's system of courts and surveillance. At the same time, legal execution processes of traded instruments are different for each country or monetary zone. However, with financial globalization, the markets' participants are either international or interconnected. That is the reason, with global systemic impacts, why the topic of markets being properly organized was raised by the G20 during its 2009 Pittsburgh meeting. The CDS and AIG issue of their London branch hit by Lehman Brothers' failure was on everyone's minds. The impact was absorbed by the US government rescue of AIG, but the underlying topic of international transactions and international players was not treated.

There is still a lot of research to be launched to develop unified standards on stamping, valuation of face value and guarantees that neither accounting standards nor laws have undertaken as yet. The efforts which need to be made are important to the efficiency of surveillance agencies, but above all to the allocation of seignorage rights between nations that should, in our minds, remain a constitutional privilege. This would also address, as we will see, the matter of excessive compensation in the financial sector. Orderly resolution processes of both financial institutions and market counterparties, if not achieved, are on the way, from an organizational point of view, on both sides of the Atlantic. Nevertheless, and we will come back to this later, no one knows with what funds a failure will be refinanced without opening the central banks' money printers. Being organized and becoming transparent also leads to a more systemic and more obvious image of macroeconomic international unbalances. The international character of marketplaces and instruments with their legal consequences has not been sufficiently addressed.