Edited by Phoebus Athanassiou
Chapter 18: The Domestic Rooting of Financial Regulation in an Era of Global Capital Markets
Thomas Oatley* and W. Kindred Winecoff † 127 128 INTRODUCTION The financial crisis that began in 2007 has forced academics and policymakers to re-examine regulatory policy at the domestic and international levels. In an op-ed in the Washington Post during the height of the crisis, Prime Minister Gordon Brown (as he then was) called for ‘cross-border supervision of financial institutions; shared global standards for accounting and regulation; a more responsible approach to executive remuneration that rewards hard work, effort and enterprise but not irresponsible risk-taking; and the renewal of our international institutions to make them effective early-warning systems for the world economy’ (Brown 2008). Similar responses were not only common following the current crisis, they continue a history of introspection following financial upheavals: in the United States (US), the Glass-Steagall Banking Act of 1933 – which established federal deposit insurance and separated commercial from investment banking – was a response to the waves of bank failures that exacerbated the Great Depression. In 2010, the United Kingdom (UK) reacted to the subprime financial crisis by moving to abolish its primary financial regulator, the Financial Services Authority, and giving its authority to several other agencies including the Bank of England and the Consumer Protection and Markets Authority, a new prudential supervision authority. At the international level, the Basel Committee on Banking Supervision was formed to provide a platform for national governments to coordinate policy after policymakers mis-handled the liquidation of the German * Thomas Oatley – Associate Professor, Department of Political Science, The University of North Carolina...
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