Strengthening the Global Financial System through Institutional and Legal Reform

Kern Alexander, Rahul Dhumale and John Eatwell

in Global Governance of Financial Systems

Published in print September 2005 | ISBN: 9780195166989
Published online September 2007 | e-ISBN: 9780199783861 | DOI:
 Strengthening the Global Financial System through Institutional and Legal Reform

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This chapter presents proposals for reform of the institutional framework and functions of international financial regulation. It argues that effective international financial regulation requires a treaty regime that combines legally binding principles of effective regulation (i.e., capital adequacy and consolidated supervision and allocating LOLR function) and a mechanism for developing nonbinding soft law codes (capital adequacy formulas and coordination of enforcement) derived from the binding principles. The chapter analyzes transaction costs and sovereignty costs in international relations and how they affect state calculations to pool their sovereignty in establishing formal and informal institutional structures. It also considers institutional reform for regulating international financial markets.

Keywords: international financial regulation; treaty regime; transaction costs; sovereignty costs; global governance

Chapter.  7824 words.  Illustrated.

Subjects: Financial Markets

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