International Finance Regulation: The Quest for Financial Stability

CHAPTER 15 The Challenges of Global Regulation

“It's a bloody nightmare. The regulators have no respect for one another at all. Each country is looking after itself.”

—Senior executive in charge of regulation at one of the world's biggest banks, quoted by the Financial Times

The idea of global regulation is probably a utopia or Myth of Sisyphus.¹ However, several key issues need to continue to be analyzed and treated with a deep understanding of the global implications of national regulation.

Everybody is guilty. Germany implemented its hedge fund regulation² the day after a European framework had been discussed, ignoring the discussions. France implemented a banking regulation³ while the European banking union was being launched. The United States implemented a derivative system that contradicted the agreement it had with Europe four months before. When the European Commission proposed its new structure France was the most vocal opponent.

The world we live in will be dominated by global trends. However, its political leadership depends on many elements that are driven by domestic issues. We all regularly wonder how, in the middle of global turmoil, the national instinct takes over. As the BIS puts it:

Challenges in resolving a cross-border bank crisis arise for many reasons, one of which is that crisis resolution frameworks are largely designed to deal with domestic failures and to minimise the losses incurred by domestic stakeholders. As such, the frameworks are not well ...