Not All Financial Regulation Is Global

POLICY BRIEF 10-22

Not All Financial Regulation Is Global

by Nicolas Veron, Peterson Institute for International Economics
and Stéphane Rottier, National Bank of Belgium

September 2010

Two major shifts in the global financial regulatory landscape are likely impeding harmonization of global financial regulation: financial multipolarity, meaning the rise of emerging-market economies such as China and the impact of this trend on decision-making at the global level, and financial reregulation, or the trend toward stronger regulation of financial systems to buttress financial stability, particularly in developed economies. As a result, the ambitious objectives initially set by the G-20 leaders in the wake of the unprecedented financial crisis have so far not resulted in major international breakthroughs, warranting a reconsideration of the global financial regulatory agenda. Consistent regulatory choices across the globe are preferable, but achieving consistency involves difficult political and economic tradeoffs. Continued global capital-market integration can no longer be taken for granted. Policymakers should prioritize four key components to ensure the sustainability of financial integration: (1) strong global public institutions to provide a comprehensive analytical picture, set authoritative standards, and foster and monitor the consistency of regulatory practice; (2) globally consistent financial information; (3) new arrangements to enable and supervise globally integrated capital-market infrastructure; and (4) creating a level playing field for global capital-market intermediaries by addressing competitive distortions.

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