Transnational policy communities and financial governance: the role of private actors in derivatives regulation

Abstract

The article starts from the premise that the traditionally public functions of regulation and supervision are changing in order to adequately deal with large financial institutions operating in increasingly transnational markets. The analysis highlights the gaps left by existing public arrangements and establishes that as a result, the private sector has assumed a significant degree of authority. The article shows that private initiatives have been successful in setting best practice standards and promoting monitored self-regulation and market-based supervision. It explains how and why private groups acquire a decision-making and implementation role and furthermore, explores the issues of authority and legitimacy that follow. The article illustrates these points by focusing on the Group of Thirty, one such private organisation that has exerted considerable influence. More specifically, the analysis traces the policy influence of this group on the regulatory and supervisory framework of over-the-counter derivatives. Finally, the article shifts the attention to some of the implications of private sector involvement in policy and the potential risks to systemic stability