Financial Regulation’s Overlooked Networks

David Zaring

Presentation at HKU Conference on

International Financial Regulation

12/12-14/13

Overview

• The Agencification of International Financial Regulation

Structure

Principle

• The Role of Other Networks

Standard providers to the FSB

Members seeking cross-border regulatory values

• Motivation:

Develop the schematic of IFR

Shine light on overlooked networks

The Financial Stability Board & G20 – The Middle and Top

Tiers of A Global Agencified Institution

G20

•“The success of our coordinated effort to respond to the recent crisis have increased the case for more sustained and systematic international cooperation,”

• G-20, Communique, Pittsburgh Heads of State Summit, Sep. 25, 2009, available at http://www.ft.com/intl/cms/s/0/5378959c-aa1d-11de-a3ce-00144feabdc0.html#axzz1nQaI4ZhL.

FSB

•Strong regulation

•Harmonization

•Early Warning

•The FSB Charter:

“promote financial stability by developing strong regulatory, supervisory, and other policies.”

“not intended to create any legal rights or obligations.”

“fostering a level playing field through coherent implementation across sectors and jurisdictions.”

Networks: The Bottom Tier Embraces Procedural

and Substantive Regularity

1) a national treatment principle

2) a most favored nation principle

3) a preference for rulemaking over

adjudication

4) a subsidiarity principle of enforcement

5) a peer review model of enforcement

6) a network model of institutionalization.

The International Association of Deposit Insurers

• Deposit insurance: an intermittently used financial

stability tool

• After the financial crisis: the rise of deposit insurance

• The IADI – a network created to proseltyze a financial

regulatory product, and to offer best practices, bolstered

by some peer review, to encourage a particular adaption

of that product.

.

International Association of Deposit Insurers

Working to develop functional standards for varying jurisdictions

Figure: Cross-country comparison of coverage levels at end-2010 (% of total deposits, fully covered

depositors, and fully covered eligible deposit accounts)

*Bars not shown are not available

International Auditing and Assurance Standards Board

• A network concerned with gatekeepers and ethical

standards

• Increasingly important, given the internationalization of

accounting

• Adopting standard public administrative law procedures –

like many networks

International Auditing and Assurance Standards Board

The principles the different factors that impact audit quality

International Auditing and Assurance Standards Board

Structure of Pronouncements Issued by the IAASB

Financial Action Task Force

• Overlooked only as a model of financial stability

• Principles plus regulation

• Strong embrace of peer review as enforcement

mechanism

Financial Task Force on Money Laundering

Mutual evaluation for membership based on most recent

Recommendations

MER = Mutual Evaluation Report

Financial Task Force on Money Laundering

Ranking of countries in

compliance with standards

may be surprising

*Date in brackets represent year of

latest FATF peer review

Internatiional Accounting Standards Board

• Accounting as an ur-case for harmonization

• The Board as a geopolitical instrument

• Accounting’s bureaucratic organization

International Accounting Standards Board

Structure of the IFRS Foundation and the IASB

International Accounting Standards Board

Structure of the IASB an the IFRS Standard Setting Process

International Accounting Standards Board

IFRS Adoption Timeline

http://www.adoptifrs.org/ad

optiontimeline.aspx

International Accounting Standards Board

IFRS Adoption

Around the World

Committee on Payment and Settlement Systems

• Payments: the respected recourse of the financial

regulator

• The CPSS as Basel adjunct

Committee on Global Financial System

• Forward thinking or bank regulator vote rigging?

• Principles in their broadest sense