E. Adaptation to change
In order to avoid holding a Maginot Line, and allowing the causes offuture crises to evade regulation, it will be necessary to continue to be vigilant regarding growing risks, as well as having the adaptability to address them. Thus, international law or organization in this area must have the capacity to observe, analyse and adapt as necessary. Normal methods of making international law by custom or treaty are likely to be too slow, and too politically charged, to be feasible. Rather, some degree of delegation to a regulatory agency appears necessary, combined with the resources and tools to promote effective action.
F. Economies of scale and scope
There may be important benefits that can be obtained by sharing regulatory capacity among states in particular areas. For example, smaller countries may benefit from economies of scale by sharing regulatory capacity among themselves, or with larger countries. Insofar as financial services operations are increasingly global, while the default structure of regulation is national, modifications to regulation to make it more international may yield important benefits. One significant benefit is in the ability to engage in coordinated international surveillance and audit, in order to identify accounting irregularities, other violations of rules, or defalcation.
There may be important economies of scope that can be obtained from combining different financial services regulatory functions. Not only would this allow more coordinated regulation of financial conglomerates, but it would also make it easier to identify perimeter problems and leakage. Furthermore, to the extent that identification of fragmentation shows relationships and synergies between prudential regulation of financial services and macroeconomic regulation, development policy, investment regulation or trade, it may be possible to capture further economies of scope.
Once states determine which types of commitments for cooperation would be appropriate, they will be able to determine which organizational features are appropriate to support those commitments. They will be able to determine whether to ‘house’ the commitments within an existing international organization, whether to establish a new organization, or, alternatively, to split responsibilities among different international organizations.
There are a number of international organizations with responsibilities relating to prudential regulation of finance. It is worthwhile to consider the existing responsibilities of these organizations, as well as their capacities and competences, in connection with an assessment of the possibilities for international cooperation with respect to prudential regulation.