The second session focused on attaining a suitable international regulatory framework for successful global financial integration. Such a framework would reduce the risk of future crises and ensure financing for the investment and innovation that will drive growth going forward.
If there is one key lesson to be gleaned from the crisis, it is that the evolution of financial markets and the integration of financial systems outpaced the development of international regulatory frameworks for the governance of global capital. In effect, financial markets are internationally integrated, but prudential regulation and supervision is nationally based. In this environment, financial firms exploited gaps in legal and regulatory frameworks in a process of "regulatory arbitrage" to engage in excessive risk-taking that put the entire global economy at risk.
The session looked at international financial regulatory reform, including the implementation of new capital rules, strengthened cross-border resolution regimes and a framework for containing and mitigating potential risks from the so-called "shadow" banking system that operates outside the regulated banking sector. Strengthening the FSB is also key to the success of international financial regulation reforms. Revisions to the FSB Charter, endorsed by the G20 leaders, for placing the FSB on "an enduring organizational footing, with legal personality, strengthened governance, greater financial autonomy and enhanced capacity to coordinate the development and implementation of financial regulatory policies" would be the first step to achieving this goal. Prompt implementation of such Charter changes and a review of the FSB's representation structure would further reinforce the role of the FSB.
Chair: Pierre Siklos, Wilfrid Laurier University, Balsillie School of International Affairs
- James Aitken, Aitken Advisors
- Marshall Auerback, Institute for New Economic Thinking
- Eric Helleiner, University of Waterloo
- Sony Kapoor, ReDefine
- Sangchee Lee, Financial Services Commission