Edited by Barry Rider
Chapter 20: Responsibility and accountability in the financial sector
Much of the agenda for financial regulation is driven by the international organisations, which produce ‘soft law’ instruments that are converted into legislative form in the various jurisdictions. One example of this is the Basel documents that the Basel Committee on Banking Supervision has published, which do not have direct effect. The Basel II Framework has been transposed into the laws of many countries, and the Basel III Framework is undergoing the same process. The international organisations are constantly active in producing guidelines for areas of financial regulation that have gone awry. For instance, both the Financial Stability Board (FSB) and the International Organization of Securities Commissions (IOSCO) have produced instruments concerning credit rating agencies and, more recently, financial benchmarks. These organisations tend to work together, and in co-ordination with the governments of the largest countries, in order to lay down a framework for financial regulation on a global basis. The financial crisis of 2007–2009 revealed a number of difficulties in the sector, which have been addressed – not least in the establishment of the FSB as the ‘enhanced’ successor of the Financial Stability Form. The FSB’s objectives are ‘to coordinate at the international level the work of national financial authorities and international standard setting bodies (SSBs) in order to develop and promote the implementation of effective regulatory, supervisory and other financial sector policies’ and ‘to address vulnerabilities affecting financial systems in the interests of global financial stability’.
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