Elgar Financial Law series
Edited by Kern Alexander and Niamh Moloney
Chapter 2: Policy Stances in Financial Market Regulation: Market Rapture, Club Rules or Democracy?
1 Nicholas Dorn INTRODUCTION This chapter argues in favour of democratisation of financial market regulation – a topic resisted by many market participants and by some in regulation, yet one that is being explored by policymakers in the US and the EU, notably the UK.2 Two reasons are advanced. First, active democratic oversight of financial market regulation is merited on grounds of principle. Second, accountability to national and regional parliaments would result in regulatory diversity, resulting in more robust market systems at global level. The current de facto ‘independence’ of financial market regulators allows them to network globally yet privately, to negotiate on the basis of market demands (each national regulator championing its home industry) and to converge their rules accordingly – producing common blind spots, systemic vulnerabilities and heightened potential for global crisis. Clearly this analysis cuts against the grain of much regulatory thinking. Before the systemic crisis manifested itself, regulatory thinking was explicitly favourable to regulatory convergence and it remains so (or perhaps is 1 The author thanks interdisciplinary masters students on the 2008/9 course on global governance at Erasmus University Rotterdam and senior colleagues in the law faculty; Michael Levi at Cardiff University and Tom Vander Beken at Gent University, both of whom commentated on an earlier version; participants in at the 23–25 June 2009 W G Hart Legal Workshop on Law Reform and Financial Markets, held at IALS, London; Simone White, IALS Research Fellow, who critiqued successive drafts; and the editors of this volume, particular Kern Alexander....
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