INTERNATIONAL REGULATION

The financial crisis of 2008 has exposed the greed, betrayal and irresponsibility of the banking world. ( insurance companies did not resort to those aberrations except for AIG). This transatlantic crisis (Asia was largely unscathed) has led to a flurry of regulation. I have decided to make it one of my fields of expertise that culminated in the course I teach at Columbia Law School on European Banking and Finance. It has also exposed some key weaknesses of these efforts and the mindset of bankers is still pretty much the same, without consideration for social and ethical roles.


The remuneration system continues to attract executives that are focused on short term remuneration and cash. The fact that the United States did not even regulate this issue except for the banks they bailed out as long as they were bailing them out, made the European, British and Swiss efforts difficult to implement without risks of losing the global competitive battle.

New regulations penalize long term loans or investments by financial institution. Their role at the service of the economy is impaired by those provisions, especially in infrastructure financing. This is true especially for insurance companies who have been wrongly targeted by regulators using banking risk tools for a totally different industry.

No efforts have been made to make top executives accountable. Board Members have not even been looked at. There is no accountability at the top: only at the bottom of the pyramid. Some CEOs fight to remain Chairmen while their equity is being decreased by fines for wrong doing in the tens of billions of dollars.

The level of competence and seniority of parliaments, governments and regulators remains well below the necessary level to address the complexity of the “unintended consequences” of their actions. The fire administrative measures that are ineffective while they do not touch the core of the problems. Corporate lobbying makes sure that they will not be threatened by the legislative and regulatory proposals. Sometimes they even write the legislative proposals. This level of incest between finance and governments has been sufficiently demonstrated, but the FIFA crisis certainly demonstrates the impotence of the public sector to promote ethical behavior.

 

International Finance Regulation: the quest for financial stability was an attempt to indicate directions that would ensure that new regulation would provide financial stability.