The Emerging Post-crisis Financial Architecture: How Far Has Reform Gone?

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This paper focuses on two cases of transnational financial governance that confirm that ideas and material interests are closely aligned in the construction of regulatory institutions at the international level: the Basel-II/III international capital adequacy standards and the IOSCO-based regulatory processes that underpin cross-border securities markets. The paper first establishes that the pre-crisis system of financial regulation and supervision left public authorities dependent on private sector expertise and information provision such that policy idea-sets became increasingly aligned with private sector preferences. Secondly, this market-based system of financial governance provided benefits to precisely those whose advocacy underpinned its emergence while facilitating neither financial stability nor resolving the weaknesses of national-level governance in a context of cross-border integration. Lastly, it remains unclear if either pre-crisis alternatives or the lessons of the crisis itself have been applied properly to the reforms. The reform debate continues to pursue an essentially market-based approach to the problem of financial governance at the national, regional and global levels. Policy failure endogenous to a pre-crisis regulatory coalition has so far failed to disturb the tenacity of material interests and inertia of institutional path dependency.