Session 2 - Global Financial Regulation & International Governance of Global Capital Flows

Series: CIGI '12: Five Years After the Fall

November 11, 2012

Session 2 - Global Financial Regulation & International Governance of Global Capital Flows

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

Series: CIGI '12: Five Years After the Fall

Over the past five years, the global financial crisis has dominated international policy discussions. This August marks the fifth anniversary of its outbreak. The starting point for the CIGI ’12 conference, then, is the recognition that the legacy of the global financial crisis is felt across a spectrum of issues. These issues span the short-term outlook for global growth, global financial regulation and strengthening the Financial Stability Board (FSB); the challenges of poverty reduction and sustainable development; and the transition in global leadership, as, on the one hand, US economic and strategic leadership is eroded by the legacy of the financial crisis and political gridlock over public finances, while, on the other hand, China and other emerging economies continue their economic and geo-political rise. CIGI ’12 will focus on making concrete policy recommendations to build the global governance arrangements that are needed to respond effectively to the legacy of the crisis.

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