The Role of International Organizations in Financial Market Reform Open Access
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The Role of International Organizations in Financial Market Reform - Since the end of the Second World War, we have experienced one of the greatest continuing developments in history, world economic globalization. Economic growth since 1945 has been unprecedented. Moreover, this growth, which began primarily within domestic markets, has become truly international and has manifested itself in the integration of financial markets throughout Europe, Asia and the Americas. And, this growth has created emerging capital markets throughout the world. However, continued and sustainable growth requires a policy framework that prominently includes an orientation toward integration in the global economy. The integration and emergence of economic growth has been accompanied by times of downturn and even crisis. Now, as we are once again emerging from an economic crisis, comparable to the scale of the previous crises in Asia, Latin America, and perhaps even America's Great Depression, governments and regulators in advanced and emerging economies are working to develop a new regime of regulation. Guiding the reform efforts to minimize the effects of these crises, in many cases, are IOs such as the International Monetary Fund (IMF), the G20, the Financial Stability Board (FSB and formerly known as the Financial Stability Forum), and the Basel Committee on Banking Supervision (BCBS).Globalization in finance and banking requires the convergence of law and economics in order to develop efficient and effective global regulatory regimes that can monitor emerging markets, foster increased global banking integration and minimize the costs of a potential crisis in the future. In order to nurture such convergence across borders of advanced and emerging economies, IOs are critical and must serve a positive role in developing standards and model regulations to improve cross-border regulatory cooperation and to increase the possibility of creating a truly global financial architecture.Promoting increased global banking integration through IOs creates efficiency in financial services regulation and can thereby serve to minimize the effects and frequency of financial crises. The resulting economic efficiencies should provide significant benefits to emerging economies. While it is very unlikely that a legitimate global regulator will take shape within the foreseeable future, or that IOs such as the IMF, the FSB or the G20 will develop a specific, widely-adopted rules-based regulatory regime for the global economy beyond the current "soft law" these organizations produce, increased integration of the financial markets around the world will require development of generally accepted global financial standards.