International Law in Financial Regulation and Monetary Affairs

I THE CRISIS OF 2007-2009: NATURE, CAUSES, AND REACTIONS The Crisis of 2007-09: Nature, Causes, and ReactionsI. IntroductionA. A liquidity crisisB. A capital crisisII. 2007-2009: Liquidity or Capital?III. A Brief Historical AccountIV. Why the Recent Crisis?A. Macroeconomic imbalances notably between the USA and ChinaB. Lax monetary policy in the USA and other countriesC. Failures of regulation and failures of supervisionD. The TBTF doctrine and distorted incentivesE. Excesses of securitizationF. The part played by derivatives markets, unregulated firms, lightly regulated firms, and the shadow banking systemG. Corporate governance failuresH. Risk-management failures, bad lending, excessive leverage, and excessive complexityI. ‘The usual suspects’—greed, euphoria, etc.J. Faulty economic theoriesV. A Longer PerspectiveVI. The Regulatory ResponsesVII. Concluding ObservationsII ARCHITECTURE AND CONCEPTUAL ISSUESSystemic Regulation of Global Trade and Finance: A Tale of Two SystemsI. Trade and Finance: The Twin Pillars of Systemic Regulation of the Global EconomyA. Nature or nurture?B. Systemic performance—finance and trade—crisis to crisisII. Characteristics of the Trade and Financial Systems: Bretton Woods RevisitedA. From a common origin to different pathsB. Contrasting regulatory philosophiesC. Characteristics of the robust regulatory system governing tradeRule-oriented systemAlignment of incentives with the public goodDispute settlement and self-enforcementRegulatory capture and the political economy underlying effective global regulationComprehensive coverage—the domain of the regulatory system is coextensive with the domain of the problemTransparencyGovernanceIII. Conclusion—The Quest for CoherenceThe International Monetary System: A Look Back Over Seven DecadesI. IntroductionII. Creating an international Monetary SystemA. Before Bretton WoodsB. The IMFC. The code of conductD. Transactions with the FundIII. The Fund in Operation: 1946-71A. Drawing rightsB. Standby arrangementsC. The demise of the par value systemD. The par value system on life support (1971—73)IV. Toward a New Fund AgreementA. The amended Articles of AgreementB. SurveillanceV. A Different IMFVI. The International Monetary System and Regional CrisesA. Mexico 1982—83VII. Recent AdventuresA. South-East Asia 1997—98B. Russia 1996—99C. Argentina 2000-07VIII. ConclusionsTowards a New Architecture for Financial Stability: Seven PrinciplesI. The Financial Crisis and the Organization of SupervisionII. Regulatory Environment and BackgroundA. USAB. UKC. EUIII. Seven Regulatory PrinciplesA. Principle 1: The supervision of banking, securities and insurance should be further integratedB. Principle 2: Systemic supervision must be under the purview of the central bankC. Principle 3: Management by Exception should govern the relation between micro- and macro-supervisionD. Principle 4: The supervisor must build a strong culture and rely on subjective performance, rather than quantitative incentives, to motivate its agentsE. Principle 5: The macro-supervisor should be less independent than central banks are now in their monetary policy responsibilitiesF. Principle 6: The macro-supervisor must limit its reliance on self-regulationG. Principle 7: International supervision must move from a loose network to a hierarchical structureIV. Conclusions: A New EU ArchitectureWhy Soft Law Dominates International Finance—and not TradeIntroductionI. Hard Law and International Economic AffairsII. The ‘Soft’ Sources of International Financial LawIII. Key Species of (Soft) International Financial LawA. Best practicesB. Regulatory reports and observationsC. Information-sharing and enforcement cooperationIV. Dominant Explanations of Soft Law’s PopularityV. Filling the Gaps in Existing TheoryA. Stable versus unstable issue—area equilibriaB. Reputational disciplinesC. Market disciplinesD. Institutional sanctionsVI. Why Predominance is not PerfectionThe ‘Santiago Principles’ for Sovereign Wealth Funds: A Case Study on International Financial Standard-Setting ProcessesI. IntroductionII. The Beginnings of the SWF Multi-Governance, Rule-Oriented ProcessesA. The domestic starting point: the US treasuryB. The international level: commandeering the IFIsC. The covert trilateral trackD. The IFIs at workIII. The Santiago Principles as ‘International Best Practices’IV. The IWG-ISWF Forum as ‘Soft Regulatory Process’V. Concluding ObservationsIII FINANCIAL MARKET REGULATIONThe Role and Prospects of International Law in Financial Regulation and SupervisionI. IntroductionII. Areas, Systems and Methods of Domestic Regulation of Financial MarketsA. Classical areas of financial lawB. Systems and mechanisms of regulation and supervisionC. Conceptual transnational challengesIII. The Extension of Areas of Supervision and Regulation and New Methods after the CrisisA. New areasB. New methodsC. Conceptual transnational challengesIV. What Level of Harmonization is Optimal for Financial Markets?V. ConclusionMultilayered Governance in International Financial Regulation and SupervisionI. IntroductionII. The Starting Point: Existing Milestones in Financial MarketsA. International financial regulationB. Limits of traditional international lawC. Fragmentation of lawIII. The Ongoing Process: Development of New Theoretical ConceptsA. Concept of networkismB. Concept of multilayered governanceC. Concept of polycentric regulationIV. The Future Prospects: Global Coherence Based on Multilayered Governance?A. Characteristics and elements of global governanceB. Importance of common core valuesC. Development of standards applicable at different levelsHistorical developmentsFinancial regulation at different levelsStandards as a means of establishing an architecture of multilayered governanceD. Allocation of supervisory powers in a multilevel approachSupervision as a national concept in an international contextInternational standard-settingSupervisory colleges as an additional level of governanceV. ConclusionBorder ProblemsI. IntroductionII. The First Boundary ProblemIII. The Second Boundary ProblemIV. Concluding ObservationsThe International Law of Financial Crisis: Spillovers, Subsidiarity, Fragmentation and CooperationI. The International Dimension of Domestic Regulatory Reform: Opportunity and ConstraintA. ExternalitiesB. Public goodsC. Economies of scale and scope, and network externalitiesD. Regulatory competitionE. Fragmentation and CooperationMacroeconomic managementTradeDevelopmentII. Future Change and its Impact on Regulatory ReformA. GlobalizationB. Technological advanceC. Financial innovationD. Economic growthIII. Applying the Subsidiarity Methodology to International Financial Regulation CooperationA. Corporate governance and compensationB. CapitalC. PowersD. Safety nets, bailouts, and resolutionE. Securities disclosure regulationF. Rating agenciesIV. Selecting Structural Features in International Law and OrganizationA. Hard law, soft law and networksB. SpecificityC. SurveillanceE. Adaptation to changeF. Economies of scale and scopeG. OrganizationsV. ConclusionsAddressing Government Failure through International Financial LawI. IntroductionII. Causes of the CrisisIII. Enhancing Economic Recovery and ResiliencyA. Boost competitivenessB. Revive trade liberalizationC. Eradicate domestic content subsidiesD. Avoid demagogueryIV. Improving International Institutions in Financial RegulationA. The role of the WTOB. The G8 and G20C. The ILO modelV. ConclusionsReducing Systemic Risk through the Reform of Capital RegulationI. IntroductionII. Defining the Central Problem: Systemic Risk ReductionIII. Current Capital Requirements: Basel and Leverage RatiosIV. Basel II RevisionsV. Basel III Proposals on Capital and LiquidityA. CapitalB. LiquidityVI. The Need for Additional Approaches to Capital AdequacyA. The determination of the proper amount of capitalB. Regulatory and accounting measures of capitalVII. ConclusionThe Role of Transparency in Financial RegulationI. IntroductionII. Notion of TransparencyIII. The Three Dimensions of Transparency in Financial RegulationA. Transparency and confidenceB. The first dimension of transparency: anchoring financial regulationLegal certainty, moral hazard and too big to failWho is doing what exactly under what circumstances? Responsibilities and proceduresC. The second dimension: defining substantial values and objectivesDefining values: what is the goal offinancial regulation?Keep it simple: transparency calls for robust, not more, financial regulationD. The third dimension: accountability as an element of transparencyGovernance, trust and accountabilityChallenges in holding actors in the financial sector accountableIV. ConclusionsGlobal Securities Regulation After the Financial CrisisI. IntroductionII. Deconstructing Securities RegulationIII. The ‘Europeanization’ of US Securities RegulationIV. The Failure of Securities Regulation in the Institutional MarketplaceV. International Institutional SolutionsVI. Rules, Principles and EnforcementVII. Limitations and ConclusionIV TRADE, COMPETITION, AND TAX- RELATED ASPECTSWhat Role for Non-Discrimination and Prudential Standards in International Financial Law?I. IntroductionII. Non-Discrimination in International Economic LawA. A cornerstone of the trade and investment systemB____and a neglected element of international financial law?III. Non-Discrimination in the WTO Regime for Financial ServicesIV. Potentials and Limits of the Principle of Non-Discrimination in Financial RegulationA. From Basel to Geneva: Enabling the Adoption of Binding Prudential Standards in the WTO FrameworkB. Mutual recognition, preferential trade agreements, or requiring establishment: How to ensure effective financial market supervision?C. Graduation in financial regulationV. ConclusionFinancial Services Trade After the Crisis: Policy and Legal ConjecturesI. IntroductionII. Policy ConjecturesA. Tracing the origins of the financial crisisB. Direct and indirect contextual considerationsC. The trade policy fallout from the financial crisis: possible transmission channelsD. Needed for trade-facilitating and dispute prevention purposes: an internationally coordinated regulatory responseE. Addressing competitive distortionsF. The financial crisis and the unfinished agenda in services rule-makingIII. Legal ConjecturesA. Assessing the relevance and effectiveness of existing trade disciplinesB. The need for clarity on the scope of agreed disciplinesC. Determining the scope and limits of the prudential carve-out in GATSD. Towards a necessity test for services? Addressing the trade-inhibiting effects of non-discriminatory domestic regulatory conductE. Disciplining the distortive effects of subsidies in services tradeIV. ConclusionWTO Subsidies Discipline During and After the CrisisI. IntroductionII. Existing SCM AgreementA. Export subsidiesB. Import-substitution subsidiesC. Domestic subsidiesIII. What is to be Done?A. Export subsidiesB. Import subsidiesC. Domestic subsidiesD. Subsidies to servicesIV. ConclusionThe Role of Competition and State Aid Policy in Financial and Monetary LawI. IntroductionII. Failing Firm Defence Amid CrisesA. EUB. UKC. USAD. DiscussionIII. EU State Aid Enforcement Amid CrisesA. The Legal FrameworkB. Weathering the stormIV. Concluding RemarksInternational Regulatory Reform and Financial TaxesI. IntroductionII. Bank Balance Sheet TaxesA. Domestic effortsB. International initiativesIII. FTTsA. The economic rationaleB. Global public goodsIV. CTTA. How high should the CTT rate be?B. Technical feasibility and incidenceV. FTTVI. The FTT/CTT and WTO ObligationsVII. ConclusionV MONETARY REGULATIONThe Role of International Law in Monetary AffairsI. IntroductionII. Economic Foundations: the Provision of Money and Monetary ServicesA. The central bank monopolyB. Monopoly abuse and the argument for currency competitionIII. From National to International Regulation of Money: The Need for CoordinationA. Alternative structures of international coordinationCompetition between independent central banks: the flexible exchange rate systemHarmonization of goals and procedures through loose international arrangementsHarmonization through international agreementsB. On the difficulty of reaching and maintaining international agreements on monetary policy goals and proceduresC. Disciplining national monopolies through international currency competitionIV. Framing Currency Competition in International LawA. The contribution of international trade regulation and investment protectionB. What role for law in international monetary affairs?Recourse to the doctrine of multilayered governanceWhat can we learn from competition law?What can we learn from trade regulation?V. The Role of Non-Discrimination in Monetary AffairsA. Unconditional non-discriminationB. The principle of equality and conditional MFNVI. Procedural Rights and ObligationsVII. Summary and ConclusionsFinancial Stability and Monetary Policy: Need for International SurveillanceI. IntroductionII. Booming Wealth and Private Risk-TakingIII. The Mainstream Monetary RegimeIV. The Political Economy of Financial CrisisV. Rethinking the Monetary Policy FrameworkVI. Cross-Country ComparisonsVII. Alternative Monetary TargetsVIII. International SurveillanceIX. ConclusionsEnhancing the IMF’s Regulatory AuthorityI. IntroductionII. The Fund’s Existing Mandate: An OverviewA. Regulatory powersBilateral surveillanceMultilateral surveillanceJurisdiction over current international payments and transfersProvision of informationB. Financial powersC. Advisory powersIII. Enhancing Financial Sector SurveillanceA. Upgrading the FSAPB. The provision of informationIV. Multilateral SurveillanceV. The Regulation of Capital MovementsConclusionsI. IntroductionII. Towards Multilevel GovernanceIII. Financial Stability and the Rationale of International Financial RegulationIV. Global Finance and National LawV. Soft Law Versus Hard LawVI. Linking Trade, Financial and Monetary AffairsVII. Institutional LinkagesBibliography
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