Policy preferences in financial governance: public-private dynamics and the prevalence of market-based arrangements in the banking industry

This article investigates the process of policy preference formation in global financial governance by examining the changing nature of supervision in the banking industry. The article argues that transparency and market-based supervision are now an integral and formal part of the supervision process, thus providing a public role to the private sector. The analysis focuses specifically at three levels of practice: official supervision in the context of the Basel process; private initiatives and voluntary frameworks of best practice standards; and informal market channels. The article shows that the private sector has used the above means to acquire supervision functions, thus altering the nature of supervision. The analysis highlights the costs and risks of active private sector involvement and calls for stronger accountability patterns and improved disclosure. In addition, it contrasts market-based supervisory arrangements with economic ideas about market discipline and shows that the mix of political and economic imperatives leads to a set-up where private financial institutions have the power of initiative but few incentives to fear market discipline. The article explains how and why private interests are internalised in financial policy processes and focuses on the existence of a transnational policy community of public and private participating actors who are in fundamental agreement about policy. The changing nature of supervision results from developments in global financial integration but also, the different ways in which global financial governance is generated

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

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

Global governance and transnational financial crime: opportunities and tensions in the global anti-money laundering regime

This paper examines the global anti-money laundering regime, assesses its purpose and draws some conclusions with regards to its effectiveness as a tool for targeting transnational financial crime. The paper shows that targeting money laundering is presented as a means of strengthening the integrity of the financial system and tackling organised crime through a global approach, and contrasts official policies with actual (and potential) results in practice. The paper explains that at the core of the approach lies the tension of reconciling the cost of dealing with money laundering (to be borne primarily by the private sector) and the benefits of containing financial crime, which are, at best, difficult to determine. The paper analyses the relative input of (and interaction between) the various actors in the emerging anti-money laundering regime: specialised organisations, international financial institutions, law enforcement agencies, large, specialised and offshore financial centres and the private sector. It concludes that there is little evidence that the current regime leads to a systematic approach in addressing organised crime and argues that a similarly cosmetic exercise is evident in the inclusion of anti-terrorist financing measures in the anti-money laundering regime. Instead, the paper shows that regulation in the emerging anti-money laundering regime mostly serves (a) to address the need for ‘public’ action with respect to other types of public policy goals, (b) to relieve competitive pressures from specialised and offshore financial centres and (c) to produce increasingly sophisticated marketing techniques in private financial institutions

Revolving doors and linked ecologies in the world economy: policy locations and the practice of international financial reform

Are rules for the world generated by international organizations' bureaucracies or private authority? Certainly both. This paper questions the utility of a distinction between international bureaucracies and transnational private authority, and points to how actors responsible for governing the world economy move between public and private roles. To help understand this ‘revolving doors’ phenomenon we borrow from Andrew Abbott’s work on ‘linked ecologies’, in which actors within different professional ecologies form coalitions to create alliance strategies in which they can propagate the relevance of their ideas and skills. If successful, an alliance between ecologies can take control of a policy ‘location’ - how a policy problem should be legitimately understood. We examine the benefit of linked ecologies approaches through two case studies of alliances competing for the best way to solve international financial stability issues, drawing upon interviews with practitioners from key international organizations and policy networks

Transnational Veto Players and the Practice of Financial Reform

Policy processes in transnational settings are shaped by actors whose approval and consent are required for reform to take place. These ‘transnational veto players’ frame and delimit policy options. The concept of ‘transnational veto players’ is developed through an empirical analysis of global reforms in the regulatory treatment of large financial institutions deemed ‘too big to fail’. Actors debating and developing policy on ‘too big to fail’ may have formal defined constituencies, as regulators, academics or lobbying organisations, but in their transnational interactions they are also informed by a diffuse constituency of peers through their multiple associations within policy communities. These interactions determine which policy ideas are permissible and how they are adopted. The ‘too big to fail’ case shows how reform activity to curtail the risks posed by large financial institutions may also inadvertently strengthen their position as transnational veto players

Professionals and Power Vacuums on Demographic Change

Aging populations across advanced industrialized countries are expected to have a great impact on a range of socio-economic policies, ranging from welfare and pensions provision to industrial, labor market and financial policies. While populations are aging there has also been a drop in birth rates. Demographic change is acknowledged as a policy concern within many advanced industrialized countries, but discussions about low fertility are not explicitly expressed in terms of policy objectives. Governments, sensitive to the authoritarian implications of prescriptive natalist policies, focus instead on programs that aim to enable choice about childbearing; in concrete terms this means measures such as one-off payments, improving childcare availability, and addressing worklife balance concerns.1 As an issue, low fertility is seen as a particular problem for a number of European and East Asian advanced industrialized countries. Germany and Japan stand out in having experienced especially low fertility over a sustained period of time, while countries with an established and generous welfare state or long traditions of migration appear to buck these trends among members of the Organisation for Economic Co-operation and Development (OECD)

Experts Networks and the European Commission on Demographic Change

This paper examines who populates the expert and policy network around demographic change issues in Europe. We examine how competing policy departments in the European Commission Directorates- General (DGs) deal with the issue of Europe’s changing demography, as well as discuss the role of external experts on demographic change. Our findings suggest that on demographic change issues at the EU level, DG EMPL has taken the lead, while DG ECFIN is the secondary actor. Still, internal European Commission dynamics mean that the lead actor on demographic issues has less autonomy in articulating a funded and clear policy position on how to address them. As a consequence, there is little institutional memory and hardly a depository of activity on demographic change. While outside expertise comes primarily from demographers, and other scholars concerned with demographic change, they are primarily an academic community rather than heavily engaged in European policy formulation. As a consequence of these dynamics, the European mode of governance on demographic change issues suffers from a lack of both flexibility and direction. It is an important slow-burning issue that is captured by neither the ‘new intergovernmentalism’ nor the ‘new supranationalism’ in post-crisis European governance strategies. Rather, demographic change issues largely operate in a vacuum and make only sporadic appearances on the EU agenda