The Political Economy of Financial Regulation

I will be speaking at “The Political Economy of Financial Regulation” conference organised by the CUHK, Faculty of Law

The Conference will explore the following topics:

  • Asian financial development and the ‘Washington Consensus’
  • Bailouts, rescues, bail-ins and living wills in the financial industry
  • Lobby power over making laws, rules and market structure
  • The law and politics of monetary policy in a global financial system
  • Industry capture of financial regulators
  • Role of law in constituting the financial industry
  • Problems of self-regulation in standard settings (LIBOR and FX fixes)
  • State-owned enterprises in and connected with the financial system

My presentation will focus on “The Santiago Principles and the International Forum of Sovereign Wealth Funds -Reshaping International Economic Governance through Atypical Rule-making”

This paper provides a comprehensive analysis of the evolution of the Santiago Principles (the Principles) from best practices to quasi-legal instruments, focusing on the role of the International Forum of Sovereign Wealth Funds (IFSWF). More precisely, this paper demonstrates that the changes of the internal structure of the IFSWF and the increasing role that it has assumed in enhancing the effectiveness of the Principles are transforming it from a informal and voluntary group into a new international financial authority for sovereign wealth funds (SWFs) that interprets the Principles, oversees their implementation, and provides guidance to states to incorporate them when establishing new SWFs.

The Principles were released in October 2008 by the International Working Group of Sovereign Wealth Funds (IWG-SWF) to address political, economic and legal concerns caused by the expansion of SWFs’ investments and to support free flows of capital. The IMF, interacting with the G20, led a sui generis and ad hoc process that involved the representatives of the SWFs, the WTO, the OECD and other stakeholders in the discussions of the IWG-SWF. Subsequently, the IFSWF was established, as an informal and voluntary group, under the aegis of the IMF to pursue the goals set by the Principles. In seven years the IFSWF has evolved into an independent body with a broader participation of SWFs, an internal structure and strategic goals to reach by 2018.

This paper firstly examines the ad hoc, multilevel negotiation process and the adopted Principles. Secondly, it critically assesses the implementation of the Principles by the SWFs and the role of the IFSWF as a new international financial authority. Thirdly, this paper focuses on the incorporation of the Principles in recent negotiations of free trade agreements and their impact on international rule-making. Fourthly, it draws key lessons from the review mechanisms of existing international bodies in order to improve the Principles’ implementation process and develop a proactive role for the IFSWF in order to address other challenges of SWFs’ investments improving the international regulatory framework. Finally this paper will help to clarify the role of the IFSWF in international economic governance.

Through the links can find the abstracts and the programme