Global Financial Standards and Networks: the Global Administrative Law Perspective - Núm. 30, Junio 2013 - Revista de Derecho Público - Libros y Revistas - VLEX 514189798

Global Financial Standards and Networks: the Global Administrative Law Perspective

AutorMaurizia De Bellis
CargoTenured Assistant Professor in Administrative Law, University of Rome 'Tor Vergata'; Clerk at the Italian Constitutional Court
Páginas2-28

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Introduction

Global financial standards, principles and guidelines are not a new phenomenon. The G10 central banks governors set up the Basel Committee on Banking Supervision (bcbs) in 1974, in the aftermath of the Bankhaus Herstatt collapse, and it started setting the first standards on banking at the end of the decade1. Yet, it is in the late 90s that the phenomenon gains momentum. The G7 starts supporting the standard setting process within the bcbs and its counterpart for securities, the International Organization for Securities Commissioners (iosco), not to mention the private standard setter for accounting, the then named International Accounting Standards Committee (iasc; in 2001, it has been reorganized and renamed International Accounting Standard Board (iasb)). At the same time, the group of seven aimed at fostering the standards dissemination process, involving the International Monetary Fund (imf) and the World Bank in this attempt.

The spread of global financial standard has long been considered a successful trend. Transnational regulatory networks (trns) in particular, such as the bcbs and the iosco, which are at the heart of the process, were regarded as an architrave of the New World Order2. Critiques were grounded on the secrecy of these networks and their technocratic nature3. Others argued oth-erwise, showing that the growing transparency and due process followed by the networks were effective means in strengthening their accountability4.

In the aftermath of the global financial crisis, both the effectiveness of the standards as a regulatory tool5and the efficiency of the networks as a preferential forum for cooperation6have been questioned. The due process the global regulators were following was not regarded any more as an instrument to achieve better accountability, but as one of the reasons leading to the “regulatory capture”, which helps explaining the failure of some of the global standards7.

The phenomenon of global financial standards has been examined from a number of perspectives. Some have emphasised the role the IMF and the World Bank play within a new “inter-national financial architecture”8. Others have looked at the infrastructure of global financial regulation, arguing that the substance of global

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financial regulation is often shaped by private entities9. Lastly, as mentioned above, transgovernmental networks have often been identified as a successful new model of governance10.

The Global Administrative Law (gal) research approach is particularly well-suited to frame global financial standards11: because of the features of the standard setters; because of the object of regulation; because of the standard setting procedures; because of ways standards are implemented.

First, gal scholars identified five main models of global administrations: administration by formal international organizations; administration based on collective action by transnational networks of governmental officials; distributed administration; hybrid intergovernmental/private administration and administration by pri-vate institutions with regulatory functions12. In global financial governance, regulators which fall within each of these models can be found. Intergovernmental international organizations, such as the imf and the World Bank, intervene in the implementation of financial standards. Transnational regulatory networks such as bcbs and iosco develop rules for banking and securities. The iasb and the International Federation of Accountants’ (ifac), which set accounting and auditing standards, are examples of private global governance. The Financial Stability Board (fsb), which brings together not only the intergovernmental international organizations and the transgovernmental regulatory networks mentioned above, but also domestic regulators, is a case of hybrid administration.

Second, the content of financial standards and rules is of an administrative nature. The emergence of problems that exceed domestic regulatory capacity —such as financial stability— drives a displacement of regulatory decisions from domestic authorities to transnational networks13.

Third, both transnational and private regulators are increasingly setting their standards following procedures which try to apply principles well known within domestic administrative law14.

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Fourth, the implementation of global standards requires a conceptual framework significantly different from the tradition international law model, based on the ratification of international treaties15. Global standard are first established as voluntary. In the last years, though, a number of different mechanisms —ranging from incorporation in binding acts to peer reviews— have been put in place in order to foster compliance with global standards.

The analysis shows that, even though a number of different types of bodies take part in financial governance, standard setting still takes place essentially within networks, with the significant exception of standards for accounting, put in place by the iasb. The paper argues that the gal approach is well-equipped for fostering the accountability of standard setters at different levels: during the standard setting process and during the implementation phase.

The paper will provide, first, an overview of the different bodies intervening in global financial regulation (Section II). Second, it will examine some examples of global standards, taking into account both their content and the standard setting process (Section III). Third, it will look at the implementation of global standards, and more specifically at their tendency to “make a transi-tion from soft to hard law”16(Section IV). Lastly, it will look at the accountability regimes of the regulators, which appear to profit steadily of the gal perspective (Section V).

I The global financial architecture

The different bodies intervening in global financial governance are traceable to the different types of global administration analyzed within gal literature.

A The G7, the G20, the imf and the World Bank

The G7’s involvement in the setting of global financial standards dates back to the 90s. In the Lyon summit, the group of seven recognized the standard setters’ activity and urged the imf and the World Bank to foster the implementation of the standards17. The International Financial Institutions (ifi) role in the process is more the one of standard enforcers than the one of standard setters, as it will be shown (Section IV).

The G7’s influence on the shaping of the global financial architecture increased in the late 90s, in the aftermath of the Asian financial crisis18.

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The reforms approved at the time were based on the establishment of two new institutions19. The G20 brings together emerging countries and G10 ones20. Even though regarded since its inception as a step forward in the direction of more inclusiveness and representation21, until 2008 it met only as a group of financial ministers. When first established, the Financial Stability Forum (fsf) brought together, on the one hand, banking, securities and insurance transnational regulators (bcbs, iosco and iais, respectively), and intergovernmental international organizations (the imf, the World Bank, the oecd and the Financial Action Task Force on Money Laundering (fatf)), and, on the other hand, national authorities from the G7 countries and from Australia, The Netherlands, Hong Kong and Singapore22.

After 2008, due to the spread of the global financial crisis, the role of both institutions has been strengthened. The first G20 political summit took place in Washington, in November 2008. The G20 aims at establishing itself as “the premier forum for international economic cooperation”23.

B A “Network of Networks”: the Financial Stability Board (fsb)

After the global financial crisis, the fsf was reorganized as fsb, its membership was broadened24and its mandate and powers clearly identified within the fsb Charter25, recently revised26. In the fsb participate —together with the international organizations and transnational networks, already members of the fsf— national administrative authorities (such as central banks, supervisory authorities and treasury departments) from the G20 countries. Hence, the fsb brings together and connects one to the other national, transnational and international authorities. Given that some of its members, such as the bcbs and the iosco, are themselves transgovernmental networks, it can be defined as a “network of networks”. Contrary to the transgovernmental networks, though, its member are not homogeneous in their structure, but they are very diverse.

According to the Charter, the main tasks included in the fsb mandate are: a) assessing the vul-

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nerabilities affecting the global financial system and identifying related actions needed to address them, and their outcomes; (b) promoting coordination and information exchange among authorities responsible for financial stability;
(c) monitoring market developments; (d) monitoring best practice in meeting...

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