How international financial law works (and how it doesn't)

Georgetown Law Journal

Volumn 99, Issue 2, 2011, Pages 257-327

  Brummer, Chris ^a  

^a GEORGETOWN UNIVERSITY LAW CENTER   (United States)

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EID: 78649939909     PISSN: 00168092     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (334)

1. See FIN. STABILITY FORUM, FSF PRINCIPLES FOR SOUND COMPENSATION PRACTICES (2009), http://www.financialstabilityboard.org/publications/r-0904b.pdf;
2. Press Release, Int'l Org. of Sec. Comm'ns,IOSCO Announces Next Steps on Credit Rating Agencies (July 28, 2008), http://www.iosco.org/news/pdf/ IOSCONEws124.pdf.
3. See Rob Davies, Q&A: Basel Committee's Walter Outlines Basel II Reform Agenda, RISK.NET (June 17, 2009), http://www.risknews.net/public/ showPage.html?page=862933.
4. Press Release, Int'l Ass'n of Ins. Supervisors, IAIS Supports G-20 Declaration (Apr. 7, 2009),http://www.iaisweb.org/view/element-href.cfm?src=1/ 6782.pdf; 37.
5. see also Press Release, Int'l Ass'n of Ins. Supervisors, IAIS Takes Action on G-20 and FSF Recommendations (Feb. 26, 2009), http://www.iaisweb.org/- temp/26-February-2009-IAIS-takes-action-on-G20-and-FSF-recommendations.pdf.
6. Indeed, most of the dominant "network" theory propagated by public international legal theorists has assumed relatively seamless coordination among securities regulators, a point I and others have recently noted elsewhere
7. See infra notes 27-28 and accompanying text (discussing network theory scholarship)
8. see also Chris Brummer, Post-American Securities Regulation, 98 CALIF. L. REV. 327 (2010) (discussing the limits of cross-border securities law networks and the development of new international regulatory tools);
9. Pierre-Hugues Verdier, Transnational Regulatory Networks and Their Limits, 34 YALE J. INT'L L. 113, 162-63 (2009) (critiquing the limits of networks). Even skeptics of regulatory networks generally accept their potency
10. See, e.g., Kenneth Anderson, Squaring the Circle? Reconciling Sovereignty and Global Governance Through Global Government Networks, 118 HARV. L. REV. 1255, 1287 (2005). Only when one moves to sub-specialties within international financial regulation are such pressures more readily acknowledged
11. See Stavros Gadinis, The Politics of Competition in International Financial Regulation, 49 HARV. INT'L L.J. 447, 447-53 (2008) (arguing that competition influences national regulation in securities markets);
12. see also Howell E. Jackson, Toward a New Regulatory Paradigm for the Trans-Atlantic Financial Market and Beyond: Legal and Economic Perspectives, 11 EUR. BUS. ORG. L. REV. (forthcoming 2010) (manuscript at 1-2) (on file with author) (noting new approaches by the SEC to better regulate cross-border capital spurred by limitations of territorial approaches to regulation).
13. For a sampling of some of the more prominent examples in this literature
14. see DANIEL W. DREZNER, ALL POLITICS IS GLOBAL: EXPLAINING INTERNATIONAL REGULATORY REGIMES 119-48 (2007);
15. DAVID ANDREW SINGER, REGULATING CAPITAL: SETTING STANDARDS FOR THE INTERNATIONAL FINANCIAL SYSTEM (2007);
16. Beth Simmons, The International Politics of Harmonization: The Case of Capital Market Regulation, 55 INT'L ORG. 589 (2001);
17. see also GLOBAL FINANCE IN CRISIS: THE POLITICS OF INTERNATIONAL REGULATORY CHANGE (Eric Helleiner et al. eds., 2010);
18. Beth Simmons, Compliance with International Agreements, 1 ANN. REV. POL. SCI. 75 (1998).
19. JACK L. GOLDSMITH & ERIC A. POSNER, THE LIMITS OF INTERNATIONAL LAW 16-17 (2005) (noting that theorists have only recently considered international law to be "distinct from institutions embodied by international law").
20. See ANDREW T. GUZMAN, HOW INTERNATIONAL LAW WORKS 16-18 (2008);
21. see also Jacob E. Gersen & Eric A. Posner, Soft Law: Lessons from Congressional Practice, 61 STAN. L. REV. 573, 625 (2008).
22. See, e.g., John C. Coffee, Jr., The Future as History: The Prospects for Global Convergence in Corporate Governance and Its Implications, 93 NW. U. L. REV. 641, 673-74 (1999) (advancing the thesis that many firms migrate to U.S. securities markets as a form of "bonding" in which commitments to disclosure are signaled to investors);
23. Roberta Romano, Empowering Investors: A Market Approach to Securities Regulation, 107 YALE L.J. 2359, 2361 (1998) (arguing that the market serves as a discipline in informing the choices of promoters choosing states of incorporation).
24. See Alistair Barr, Toxic Export: How America's Risky Subprime Mortgages Fouled the World's Markets, MARKET WATCH (Nov. 15, 2007, 12:52 AM), http://www.marketwatch.com/story/toxic-exporthow-us-subprime-crisis- contaminated-world-markets (explaining how the securitization of U.S. mortgages resulted in the seizure of inter-bank lending in Europe).
25. See David Henry, Matthew Goldstein & Carol Matlack, A Lethal Loophole at Europe's Banks, BUS. WK., Oct. 27, 2008, at 32 (explaining that, because European banks had used credit default swaps issued by AIG to avoid capital requirements, an AIG bankruptcy posed a significant risk to the European banking system);
26. MaryWilliamsWalsh, A.I.G. Lists Firms to Which It Paid Taxpayer Money, N.Y. TIMES, Mar. 15, 2009, at Al, available at http://www.nytimes.com/2009/03/ 16/business/16rescue.html (noting that, as counterparties to AIG-issued financial instruments, European banks received over $20 billion in U.S. bailout funds).
27. See Martha Brannigan, SEC Accuses Stanford Group Owner of Massive Ongoing Fraud, MIAMI HERALD, Feb. 18, 2009, at A1 (reporting the alleged worldwide fraud perpetrated by Robert Allen Stanford's investment company, especially in Latin America);
28. Joanna Chung, Half of Madoff Loss Borne by Foreigners, FIN. TIMES, Jan. 12, 2009, at 21 (detailing the global nature of Bernie Madoff's Ponzi scheme).
29. Martin D.D. Evans & Viktoria Hnatkovska, International Capital Flows, Returns and World Financial Integration 1 (Nat'l Bureau of Econ. Research, Working Paper No. W11701, 2005), http://www9.georgetown.edu/faculty/evansm1/ wpapers-files/globalv1.pdf.
30. However, such liberalization also increased incentives for speculation with rising tides of "hot money" into countries. JOSEPH E. STIGLITZ, GLOBALIZATION AND ITS DISCONTENTS 65-66 (2002)
31. See SASKIA SASSEN, LOSING CONTROL? SOVEREIGNTY IN AN AGE OF GLOBALIZATION 42-43 (1996).
32. HOWARD DAVIES & DAVID GREEN, GLOBAL FINANCIAL REGULATION: THE ESSENTIAL GUIDE 8 (2008).
33. See Andrew G. Haldane, The Systemic Risk Implications of Originate and Distribute, in GLOBALIZATION AND SYSTEMIC RISK 251, 251-74 (Douglas D. Evanoff et al. eds., 2009).
34. For a discussion of the territorial approach and how globalization undermines domestic regulatory rules even at the highest national levels of governance
35. see Chris Brummer, Corporate Law Preemption in an Age of Global Capital Markets, 81 S. CAL. L. REV. 1067, 1089-103 (2008) (explaining financial intermediation).
36. See id. at 1090-91.
37. Id.
38. See Ethiopis Tafara & Robert J. Peterson, A Blueprint for Cross-Border Access to U.S. Investors: A New International Framework, 48 HARV. INT'L L.J. 31, 50-51 (2007);
39. see also Brummer, supra note 17 (showing how the development of international capital markets allows for the evasion of national laws that were historically viewed as "preemptive").
40. See Tafara & Peterson, supra note 20, at 51.
41. Id. For an in-depth discussion of the evolutionary changes in exchanges that are making these developments possible
42. see Chris Brummer, Stock Exchanges and the New Markets for Securities Law, 75 U. CHI. L. REV. 1435 (2008).
43. Brummer, supra note 4, at 352 (footnote omitted).
44. See GEORGE A. AKERLOF & ROBERT J. SHILLER, ANIMAL SPIRITS, at xxiv, 59-73 (2009) (discussing irrationality and its importance as a driver for economic depression);
45. JOHN CASSIDY, HOW MARKETS FAIL 192-217 (2009) (discussing how physiological and psychological factors affect investment decisions).
46. See U.S. GOV'T ACCOUNTABILITY OFFICE, GAO-09-216, FINANCIAL REGULATION: A FRAMEWORK FOR CRAFTING AND ASSESSING PROPOSALS TO MODERNIZE THE OUTDATED U.S. FINANCIAL REGULATORY SYSTEM 2, 8-9 (2009), http://www.gao.gov/new.items/d09216. pdf (describing the purpose of banking and securities laws).
47. See, e.g., Systemic Risk: Examining Regulators Ability To Respond to Threats to the Financial System: Hearing Before the H. Comm. on Fin. Servs., 110th Cong. 4 (2007) (statement of Rep. Bachus, Member, H. Comm. on Fin. Servs.) ("[G]iven the global nature of our financial markets, U.S. regulators must work closely with their international counterparts to promote cooperation . . . among regulatory bodies, and ensure that information about potential systemic risk is shared promptly.");
48. Statement from G-20 Summit, N.Y. TIMES (Nov. 15, 2008), http://www.nytimes.com/2008/11/16/washington/summittext.html (noting the need to achieve greater transparency internationally for complex securities and financial instruments in order to promote investor protection).
49. See Anne-Marie Slaughter & David Zaring, Networking Goes International: An Update, 2 ANN. REV. L. SOC. SCI. 211, 217-20 (2006).
50. This is due in part to the view shared by many that international finance is an area of low politics.
51. See, e.g., Kal Raustiala, The Architecture of International Cooperation: Transgovernmental Networks and the Future of International Law, 43 VA. J. INT'L L. 1, 5, 28-29 (2002).
52. See id. at 41.
53. see also Donald C. Langevoort, The SEC, Retail Investors, and the Institutionalization of the Securities Markets, 95 VA. L. REV. 1025 (2009) (discussing different traditional market participation in Europe and the United States and its implications for national regulatory approaches);
54. Mark J. Roe, Legal Origins, Politics, and Modern Stock Markets, 120 HARV. L. REV. 460 (2006).
55. DREZNER, supra note 5, at 123.
56. See Lawrence A. Cunningham, From Convergence to Comity in Corporate Law: Lessons from the Inauspicious Case of SOX, 1 INT'L J. DISCLOSURE & GOVERNANCE 269 (2004) (discussing the impact of Sarbanes-Oxley on foreign firms).
57. See, e.g., DREZNER, supra note 5, at 142-45 (describing the process by which international regulators have attempted to enforce standards on countries with lax money laundering protection).
58. Brummer, supra note 4, at 352-53 & n.109.
59. Lisa L. Martin, The Rational State Choice of Multilateralism, in MULTILATERALISM MATTERS: THE THEORY AND PRAXIS OF AN INSTITUTIONAL FORM 91, 101 (John Gerard Ruggie ed., 1993).
60. See Stephen D. Krasner, Global Communications and National Power: Life on the Pareto Frontier, 43 WORLD POL. 336, 339 (1991);
61. Verdier, supra note 4, at 124.
62. See Brummer, supra note 4, at 354 & n.115.
63. See ROBERT E. SCOTT & PAUL B. STEPHAN, THE LIMITS OF LEVIATHAN 79-83 (2006) (applying contract theory to international law and noting the hold-up and moral-hazard problems that arise where a party who is obligated to perform under an incomplete contract will be tempted to reduce its "investment in the contract").
64. Vienna Convention on the Law of Treaties art. 26, May 23, 1969, 1155 U.N.T.S. 331;
65. see also Charles Lipson, Why Are Some International Agreements Informal?, 45 INT'L ORG. 495, 500, 502 (1991) (discussing the benefits of informal agreements in international law).
66. See, e.g., Kenneth W. Abbott & Duncan Snidal, Hard and Soft Law in International Governance, 54 INT'L ORG. 421, 436-39 (2000).
67. Simply put, if country X enters into a nonbinding agreement with Y and agrees to do something, but then defects from this commitment, it may not incur any significant costs because it was not a legally binding instrument. On the other hand, if the agreement is legally binding, country X may incur some kind of retaliatory sanction or reputational cost from defection. These costs can thus change the payoffs of that country and make compliance more likely.
68. See Benedict Kingsbury, Nico Krisch & Richard B. Stewart, The Emergence of Global Administrative Law, LAW & CONTEMP. PROBS., Summer-Autumn 2005, at 15, 16, 18-29 (discussing various forms of global administrative regulation).
69. Consider, for example, the Multijurisdictional Disclosure System (MJDS) program, a mutual recognition scheme adopted between the United States and Canada.
70. See Securities Act Release No. 33-6902, 56 Fed. Reg. 30,036 (June 21, 1991) (adopting and describing the MJDS). "Under the MJDS, Canadian foreign private issuers that meet eligibility criteria qualifying them as large, established companies are viewed as meeting certain of the SEC's securities registration and reporting requirements if they provide disclosure documents prepared according to the requirements of the relevant Canadian securities authorities."
71. Roel C. Campos, Comm'r, Sec. & Exch. Comm'n, The Global Marketplace and a Regulatory Overview (Sept. 17, 2004), in Commission Speeches and Public Statements Archive: 2004, U.S. SECURITIES AND EXCHANGE COMMISSION, http://www.sec.gov/news/speech/spch091704rcc.htm.
72. By using a Canadian prospectus, issuers could avoid a range of administrative costs associated with U.S. documents. Furthermore, the SEC does not review prospectuses prepared under the MJDS, which results in considerable time savings. Because the arrangement is "mutual," U.S. issuers also enjoy expedited access to Canadian markets, though only a fraction have chosen to do so, given the immediate advantages of U.S. markets. The program is thus viewed as a boon to Canadian issuers seeking to raise capital in the United States.
73. For examples, see infra notes 54, 65 and accompanying text.
74. This particular idea has had a long lineage, dating back to the New Deal. At that time, many thought that "the social and economic problems confronting the nation could not be solved, and might be made worse, by politics. Rather, such problems required the sort of dispassionate professional judgment that only a cadre of experts could supply.
75. Lisa Schultz Bressman & Robert B. Thompson, The Future of Agency Independence, 63 VAND. L. REV. 599, 612 (2010).
76. See Adam J. Levitin, Hydraulic Regulation: Regulating Credit Markets Upstream, 26 YALE J. ON REG. 143, 159 (2009).
77. See id.
78. See Press Release, White House Office of the Press Sec'y, Fact Sheet: Creating a 21st Century Int'l Econ. Architecture (Sept. 24, 2009), http://www.whitehouse.gov/the-press-office/Fact-Sheet-Creating-a-21st-Century- International-Economic-Architecture.
79. The G-20 provides this concise overview of the organization's background: Prior to the G-20 creation, similar groupings [designed] to promote dialogue and analysis had been established at the initiative of the G-7. The G-22 met at Washington D.C. in April and October 1998. Its aim was to involve non-G-7 countries in the resolution of global aspects of the financial crisis then affecting emerging-market countries. Two subsequent meetings comprising a larger group of participants (G-33) held in March and April 1999 discussed reforms of the global economy and the international financial system.
80. The proposals made by the G-22 and the G-33 to reduce the world economy's susceptibility to crises showed the potential benefits of a regular international consultative forum embracing the emerging-market countries. Such a regular dialogue with a constant set of partners was institutionalized by the creation of the G-20 in 1999.
81. About G-20, G-20, http://www.g20.org/about-what-is-g20.aspx (last visited Sept. 29, 2010).
82. Who are the G20?, GUARDIAN.CO.UK (Mar. 27, 2009), http://image.guardian. co.uk/sys-files/Guardian/documents/2009/03/27/G20-summit-27-03-09.pdf. (last visited Sept. 3, 2010).
83. For a list of communiqués, see Communiqués, G-20, http://www.g20.org/pub-communiques.aspx (last visited Sept. 29, 2010).
84. See G-20, G20 WORKING GROUP 1: ENHANCING SOUND REGULATION AND STRENGTHENING TRANSPARENCY, at i-ii, xvii, 1, 22, 40-41 (Mar. 29, 2009), http://www.g20.org/Documents/g20-wg1-010409.pdf;
85. G-20, G20 WORKING GROUP ON REINFORCING INTERNATIONAL COOPERATION AND PROMOTING INTEGRITY IN FINANCIAL MARKETS (WG2) 11-12, 36-37 (2009), http://www.g20.org/Documents/g20-wg2-010409.pdf.
86. See, e.g., G-20, PROGRESS REPORT ON THE ECONOMIC AND FINANCIAL ACTIONS OF THE LONDON, WASHINGTON AND PITTSBURGH G20 SUMMITS (2010), http://www.g20.org/ Documents2010/07/July-2010-G20-Progress-Grid.pdf (describing the progress and next steps to be taken on various summit commitments).
87. Douglas W. Arner & Michael W. Taylor, The Global Financial Crisis and the Financial Stability Board: Hardening the Soft Law of International Financial Regulation? 11-12 (Asian Inst. of Int'l Fin. L., Working Paper No. 6, 2009), available at http://law.hku.hk/aiifl/research/documents/ AIIFLWorkingPaper6June2009.pdf.
88. It served a facilitative function bringing together disparate authorities to keep the issue of financial stability on the public agenda. Part of this work has involved the publication of a compendium of best regulatory practice.
89. See Compendium of Standards, FIN. STABILITY BD., http://www. financialstabilityboard.org/cos (last visited Oct. 1, 2010). After 2001, the organization produced few reports beyond a series of status reports on ongoing and recent work relevant to sound financial systems.
90. DAVIES&GREEN, supra note 15, at 116.
91. See FIN. STABILITY FORUM, REPORT OF THE FINANCIAL STABILITY FORUM ON ENHANCING MARKET AND INSTITUTIONAL RESILIENCE 13, 18, 25 (2008), http://www.financialstabilityboard.org/publications/r-0804.pdf.
92. See FIN. STABILITY FORUM, FSF PRINCIPLES FOR SOUND COMPENSATION PRACTICES 2-4 (2009), http://www.financialstabilityboard.org/publications/r-0904b.pdf.
93. See FIN. STABILITY FORUM, REPORT OF THE FINANCIAL STABILITY FORUM ON ADDRESSING PROCYCLICALITY IN THE FINANCIAL SYSTEM 2-7 (2009), http://www.financialstabilityboard.org/publications/r-0904a.pdf.
94. KERN ALEXANDER, RAHUL DHUMALE & JOHN EATWELL, GLOBAL GOVERNANCE OF FINANCIAL SYSTEMS: THE INTERNATIONAL REGULATION OF SYSTEMIC RISK 35 (2006). Importantly, although the G-20, like its predecessor organizations, the G-7 and G-8, is not viewed as a standard setter, the organization has issued a range of broad principles and public "communiqués" that touch upon the macro-prudential regulation of securities firms and products.
95. See supra note 50.
96. ALEXANDER ET AL., supra note 58.
97. Id.
98. Id. at 35-37.
99. See COMM. ON BANKING REGULATIONS & SUPERVISORY PRACTICES, REPORT TO THE GOVERNORS ON THE SUPERVISION OF BANKS' FOREIGN ESTABLISHMENTS 1 (1975), http://www.bis.org/publ/bcbs00a.pdf.
100. See BASLE COMM. ON BANKING SUPERVISION, INTERNATIONAL CONVERGENCE OF CAPITAL MEASUREMENT AND CAPITAL STANDARDS 14 (1988), http://www.bis.org/publ/ bcbs04a.pdf.
101. Daniel Tarullo, Administrative Accountability and International Regulatory Networks 14 (Nov. 4, 2008) (unpublished manuscript) (on file with author).
102. See BASEL COMM. ON BANKING SUPERVISION, INTERNATIONAL CONVERGENCE OF CAPITAL MEASUREMENT AND CAPITAL STANDARDS: A REVISED FRAMEWORK 2 (2004), http://www.bis.org/publ/bcbs107.pdf.
103. ALEXANDER ET AL., supra note 58, at 57.
104. Id. at 58.
105. MICHAEL BLAIR&GEORGEWALKER, FINANCIAL MARKETS AND EXCHANGES LAW 468 (2007).
106. See id. at 469 (noting that "[t]he Technical Committee is the key committee for IOSCO policy development").
107. See INT'L ORG. OF SEC. COMM'NS, OBJECTIVES AND PRINCIPLES OF SECURITIES REGULATION (2003), http://www.iosco.org/library/pubdocs/pdf/IOSCOPD154.pdf.
108. See INT'L ORG. OF SEC. COMM'NS, INTERNATIONAL DISCLOSURE STANDARDS FOR CROSS-BORDER OFFERINGS AND INITIAL LISTINGS BY FOREIGN ISSUERS (1998), http://www.iosco.org/library/pubdocs/pdf/IOSCOPD81.pdf.
109. See infra section V.C.
110. ALEXANDER ET AL., supra note 58, at 61.
111. Id.
112. Id. at 62.
113. Id.
114. See INT'L ASS'N OF INS. SUPERVISORS, INSURANCE CORE PRINCIPLES & METHODOLOGY (2003), http://www.iaisweb.org/-temp/Insurance-core-principles-and- methodology.pdf.
115. The list of such standard setters can be extensive. However, I list above those standard setters that work on matters most commonly associated with "financial regulation." I thus exclude the IMF's codes involving monetary and fiscal policy transparency and data dissemination, as I do the World Bank's insolvency codes.
116. CPSS History, Organization, Cooperation, BANK FOR INT'L SETTLEMENTS, http://www.bis.org/cpss/cpssinfo01.htm (last visited Oct. 1, 2010).
117. See ORG. FOR ECON. CO-OPERATION & DEV., OECD PRINCIPLES OF CORPORATE GOVERNANCE (2004), available at http://www.oecd.org/dataoecd/32/18/31557724.pdf.
118. See INT'L FED'N OF ACCOUNTANTS, http://www.ifac.org (last visited Oct. 1, 2010).
119. See infra section V.A.
120. BLAIR&WALKER, supra note 68, at 462.
121. This does not mean that the institutions have nothing to do with codes and activities that touch on the financial sector. Perhaps most important, the IMF is responsible for establishing standards with regard to government transparency (particularly monetary and fiscal policy) and facilitating better dissemination of data to the public.
122. DREZNER, supra note 5, at 137 tbl. 5.1.
123. The IMF has also been tasked with creating guidelines to help national authorities assess whether a financial institution is systemically important.
124. See G-20 WORKING GRP. 1, ENHANCING SOUND REGULATION AND STRENGTHENING TRANSPARENCY, at xii (2009), http://www.g20.org/Documents/g20-wg1-010409.pdf. Finally, the World Bank is also a key standard setter for insolvency and creditor rights.
125. BLAIR & WALKER, supra note 68, at 462-63. The IMF and the World Bank are, however, very much involved in the propagation of standards concerning monetary and fiscal transparency.
126. Articles of Agreement of the International Monetary Fund art. IV, Dec. 27, 1945, 60 Stat. 1401, 2 U.N.T.S. 39, available at http://www.imf.org/ external/pubs/ft/aa/aa.pdf;
127. see also Factsheet: IMF Surveillance, INT'L MONETARY FUND, http://www.imfsite.org/operations/surveil-1.html (last visited Aug. 31, 2009) (discussing ways in which the IMF uses Article IV surveillance in practice).
128. See Alistair Clark & John Drage, International Standards and Codes, FIN. STABILITY REV., Dec. 2000, at 162, 164-65.
129. Id. at 165.
130. Financial sector assessments evaluate four key components of regulation: regulatory governance, regulatory practices, the prudential framework concerning the internal controls and governance of supervised entities, and the financial integrity and safety net available for depositors, investors and policy holders in times of stress and crisis. The objective of the assessments is to identify any gaps from a stability or development perspective.
131. WORLD BANK & INT'L MONETARY FUND, FINANCIAL SECTOR ASSESSMENT: A HANDBOOK 8 (2005). Thus the assessments "take into account the risk profile and sources of vulnerability of the [financial] sector" under surveillance.
132. Id.
133. See Factsheet: The Financial Sector Assessment Program (FSAP), INT'L MONETARY FUND, http://www.imf.org/external/NP/fsap/fsap.asp (last visited Aug. 31, 2009);
134. see also Clark & Drage, supra note 87, at 165 (explaining the ROSC process).
135. See generally JEAN DUPUIS, CAN. LIBRARY OF PARLIAMENT, THE BASEL CAPITAL ACCORDS (2006), http://www2.parl.gc.ca/content/LOP/ResearchPublications/prb0596- e.pdf (providing an overview of the Basel accords).
136. Compare INT'L OR000G. OF SEC. COMM'NS, CODE OF CONDUCT FUNDAMENTALS FOR CREDIT RATING AGENCIES 13 (2008), http://www.iosco.org/library/pubdocs/pdf/ IOSCOPD271.pdf (instructing credit rating agencies to place links to their codes of conduct on their home webpages)
137. THOMAS MURRAY, http://www.thomasmurray.com (last visited Sept. 29, 2010) (complying with the IOSCO mandate by providing a link to http://www. thomasmurray.com/code-of-conduct).
138. ALEXANDER ET AL., supra note 58, at 63.
139. See D. Daniel Sokol, Order Without (Enforceable) Law: Why Countries Enter into Non-Enforceable Competition Policy Chapters in Free Trade Agreements, 83 CHI.-KENT L. REV. 231, 267-68 (2008) (discussing the occurrence of this phenomenon in South America).
140. See supra Introduction.
141. See Abbott & Snidal, supra note 39, at 423.
142. Id. at 425 (discussing how some international agreements are viewed as covenants).
143. Id. at 424, 427 (discussing how rationalists view international agreements as expressing contractual commitments, usually between states).
144. Cf. Jacob E. Gersen & Eric A. Posner, Soft Law: Lessons from Congressional Practice, 61 STAN L. REV. 573, 576 (2008) (discussing how American regulatory agencies use soft law statements to explain and address their rules regarding interpretation of standards).
145. See supra Introduction.
146. Lipson, supra note 38, at 509.
147. This point has perhaps enjoyed its most famous articulation in corporate law scholarship, especially with regard to the "choice" of states under domestic U.S. corporate law.
148. See ROBERTA ROMANO, THE GENIUS OF AMERICAN CORPORATE LAW 14-24 (1993) (arguing that firms that choose states with inefficient corporate laws should have lower stock prices);
149. Ralph K. Winter, Jr., State Law, Shareholder Protection, and the Theory of the Corporation, 6 J. LEGAL STUD. 251, 254 (1977) ("[C]ompetitive legal systems should tend toward optimality so far as the shareholder's relationship to the corporation is concerned.").
150. See David Easley & Maureen O'Hara, Information and the Cost of Capital, 59 J. FIN. 1553, 1554 (2004) (showing that differences in the composition of information between public and private information affect the cost of capital, with investors demanding a higher return to hold stocks with greater private information);
151. Frank Gigler, Self-Enforcing Voluntary Disclosures, 32 J.ACCT. RES. 224, 224 (1994) (showing that disclosures even in voluntary contexts add credibility that justify even the divulgence of proprietary information).
152. Evidence for the converse of this proposition is readily available: where banks (or for that matter any financial institutions embedded in financial systems as intermediaries) are viewed as having insufficient capital to meet their operational requirements or credit obligations, "runs" on those banks are likely. For a recent description of bank runs.
153. see CARMEN M. REINHART & KENNETH S. ROGOFF, THIS TIME IS DIFFERENT: EIGHT CENTURIES OF FINANCIAL FOLLY 144-45 (2009).
154. C.M. Chinkin, The Challenge of Soft Law: Development and Change in International Law, 38 INT'L & COMP. L.Q. 850, 861 (1989).
155. This is often because rules provide a point around which market participants can converge.
156. See Richard H. McAdams, A Focal Point Theory of Expressive Law, 86 VA. L. REV. 1649, 1654 (2000). For an explanation as to how (domestic) rules can help direct behavior in the face of cognitive biases
157. see RICHARD H. THALER & CASS R. SUNSTEIN, NUDGE: IMPROVING DECISIONS ABOUT HEALTH, WEALTH, AND HAPPINESS (2008).
158. ALEXANDER ET AL., supra note 58, at 147.
159. See John C. Coffee, Jr., Racing Towards the Top?: The Impact of Cross-Listings and Stock Market Competition on International Corporate Governance, 102 COLUM. L. REV. 1757, 1761-63 (2002).
160. ALEXANDER ET AL., supra note 58, at 147.
161. For example, CalPERS, the California Public Employees Retirement System, has taken account of the implementation of global financial codes and standards when determining its investment list. Similarly, PricewaterhouseCoopers promulgates a global index that measures the impact of business, economic, legal, and ethical opacity and is specifically designed to show investors the implications of such for cost of capital in thirty-five countries around the world. The Opacity Index, PRICEWATERHOUSECOOPERS, http://www.pwc.fr/the-opacity- index1.html (last visited Sept. 29, 2010).
162. See Robert P. Delonis, International Financial Standards and Codes: Mandatory Regulation Without Representation, 36 N.Y.U. J. INT'L L. & POL. 563, 610-11 (2004) (suggesting a direct connection between standards compliance and market perceptions of a government's creditworthiness).
163. ALEXANDER ET AL., supra note 58, at 89.
164. See ABRAM CHAYES & ANTONIA HANDLER CHAYES, THE NEW SOVEREIGNTY: COMPLIANCE WITH INTERNATIONAL REGULATORY AGREEMENTS 70-71 (2007) (describing sanctions imposed by various international organizations on South Africa beginning in the 1990s).
165. DREZNER, supra note 5, at 75-77 (discussing clubs, standards, and the possibility of expulsion);
166. see also Brummer, supra note 4, at 369-70.
167. Embarrassment caused by deviating from network norms operates, for some, as a kind of social tax. Adhering to network-based standards may encourage praise, and deviation may cause embarrassment or shame that results in a loss of prestige or influence among peer regulators as the violation becomes known to others.
168. Charles K. Whitehead, What's Your Sign?-International Norms, Signals, and Compliance, 27 MICH. J. INT'L L. 695, 709-10 (2006).
169. Dave Grossman & Durwood Zaelke, An Introduction to Theories of Why States and Firms Do (and Do Not) Comply with Law, in 1 SEVENTH INTERNATIONAL CONFERENCE ON ENVIRONMENTAL COMPLIANCE AND ENFORCEMENT: CONFERENCE PROCEEDINGS 73, 78 (Jo Gerardu et al. eds., 2005), http://www.inece.org/conference/7/vol1/ 13-Grossman.pdf.
170. See id.
171. In practice, this means that only the best practices promulgated by the leading standard-setting bodies-such as IOSCO's OBJECTIVES AND PRINCIPLES OF SECURITIES ORGANIZATION, supra note 70, Basel's CORE PRINCIPLES FOR EFFECTIVE BANKING REGULATION, infra note 154, or IAIS's INSURANCE CORE PRINCIPLES AND METHODOLOGY, supra note 77-are supported under the existing monitoring regime.
172. However, more prescriptive arrangements like IOSCO's disclosure rules, the Basel Capital Adequacy Accord, or even implementation of international accounting standards under IFRS, are not.
173. In this regard, see supra section V.A. for a discussion of the Financial Action Task Force's efforts against money laundering, which are limited to combating only bank compliance with money laundering principles, and supra section V.C. for a discussion of IOSCO's Multilateral Memorandum of Understanding, which touches only on securities enforcement and not substantive matters of securities regulation.
174. See Factsheet: The Financial Sector Assessment Program (FSAP), INT'L MONETARY FUND (Sept. 27, 2010), http://www.imf.org/external/np/exr/facts/fsap. htm.
175. See, e.g., Financial Sector Assessment Program (FSAP), INT'L MONETARY FUND, http://www.imf.org/external/np/fsap/fsap.asp (last updated Sept. 16, 2010);
176. Financial Sector Assessment Program, WORLD BANK, http://www.worldbank. org/fsap (last visited Oct. 1, 2010).
177. See CHAYES & CHAYES, supra note 112, at 13-15.
178. See id. (discussing the difficulty developing nations had implementing nuclear arms reductions agreements in the 1990s).
179. Indeed, the observance report budget alone was approximately $3.8 million dollars without any verification capacity. INT'L MONETARY FUND & THE WORLD BANK, THE STANDARDS AND CODES INITIATIVE-IS IT EFFECTIVE?AND HOW CAN IT BE IMPROVED? 26 (2005), http://www.imf.org/external/np/pp/eng/2005/070105a.pdf.
180. CHAYES & CHAYES, supra note 112, at 191.
181. For example, under the IMF's Financial Sector Assessment Program, the results of an investigation of a country's financial systems are published only with the permission of the country.
182. Edwin M. Truman, The IMF and Regulatory Challenges, INT'L SPECTATOR, Mar. 2010, at 37, 49.
183. Clark & Drage, supra note 87, at 166.
184. INT'L MONETARY FUND & THE WORLD BANK, supra note 123, at 18. For developing economies the publication rate is approximately 65%, for emerging nations, 70%, and advanced economies, 100%. Id.
185. For a background on noise-trader research in economic literature.
186. see generally Donald C. Langevoort, Taming the Animal Spirits of the Stock Markets: A Behavioral Approach to Securities Regulation, 97 NW. U. L. REV. 135, 139-52 (2002).
187. Erik F. Gerding, Laws Against Bubbles: An Experimental-Asset-Market Approach to Analyzing Financial Regulation, 2007 WIS. L. REV. 977, 999-1022 (noting academic research demonstrating how even relatively financially sophisticated investors can behave like noise traders).
188. This will especially be the case with thin markets or, for the purpose of this Article, where financial institutions raise money or transact with relatively little financial activity.
189. INT'L MONETARY FUND & THEWORLD BANK, supra note 123, at 44.
190. Furthermore, even if lawyers are hired to assist analysts, no lawyer will understand all of the diverse regulatory approaches adopted by different countries, and thus general assessments of risk will be difficult and costly.
191. Id.
192. INT'L MONETARY FUND & THEWORLD BANK, supra note 123, at 24.
193. See Delonis, supra note 110, at 609.
194. For discussion of the other specialist standard-setting bodies, see supra notes 78-82 and accompanying text.
195. See DREZNER, supra note 5, at 124 (describing how regulation reduces the rate of return for offshore financial centers).
196. See The 40 Recommendations, FIN. ACTION TASK FORCE, http://www.fatf-gafi. org/document/28/0,3343,en-32250379-32236920-33658140-1-1-1-1,00.html (last visited Oct. 26, 2010).
197. Id. at 142.
198. Id. at 142-43.
199. High-Risk and Non-Cooperative Jurisdictions, FIN. ACTION TASK FORCE, http://www.fatf-gafi.org/pages/0,3417,en-32250379-32236992-1-1-1-1-1,00.html (last visited Sept. 5, 2010).
200. See DREZNER, supra note 5, at 145.
201. Verdier, supra note 4, at 148.
202. Id. (describing relevant provision of the USA PATRIOT Act).
203. Id.
204. Id.
205. See High-Risk and Non-Cooperative Jurisdictions, FIN. ACTION TASK FORCE, http://www.fatf-gafi.org/pages/0,3417,en-32250379-32236992-1-1-1-1-1,00.html (last visited Sept. 5, 2010).
206. See, e.g., Verdier, supra note 4, at 148.
207. See FIN. ACTION TASK FORCE, FATF IX SPECIAL RECOMMENDATIONS: SPECIAL RECOMMENDATIONS ON TERRORIST FINANCING (2001), http://www.fatf-gafi.org/ dataoecd/8/17/34849466.pdf.
208. See supra note 138.
209. The FATF does not have a tightly defined term of action. Instead, the organization periodically reviews its mission: The current mandate of the FATF (for 2004-2012) was subject to a midterm review and was approved and revised at a Ministerial meeting in April 2008.
210. See About the FATF, FIN. ACTION TASK FORCE, http://www.fatf-gafi.org/ pages/0,3417,en-32250379-32236836-1-1-1-1-1,00.html (last visited Oct. 1, 2010).
211. See Monitoring Implementation of the FATF Recommendations, FIN. ACTION TASK FORCE, http://www.fatf-gafi.org/document/60/0,3343,en-32250379-32236920- 34039228-1-1-1-1,00.html (last visited Oct. 1, 2010).
212. See High-Risk and Non-Cooperative Jurisdictions, FIN. ACTION TASK FORCE, http://www.fatf-gafi.org/pages/0,3417,en-32250379-32236992-1-1-1-1-1,00.html (last visited Oct. 1, 2010).
213. BASEL COMM. ON BANKING SUPERVISION, CORE PRINCIPLES FOR EFFECTIVE BANKING SUPERVISION 1 (1997), http://www.bis.org/publ/bcbs30a.pdf.
214. See id. at 2.
215. See id. at 5-7.
216. See INT'L MONETARY FUND &WORLD BANK, IMPLEMENTATION OF THE BASEL CORE PRINCIPLES FOR EFFECTIVE BANKING SUPERVISION, EXPERIENCES, INFLUENCES, AND PERSPECTIVES 8 (2002), http://www.imf.org/external/np/mae/bcore/2002/092302.pdf.
217. Id.
218. Id. at 10. Other kinds of assessments do, however, take place. Id. at 11.
219. See id. at 23-24.
220. Basel I employs, for example, a fairly simple ratio for determining the amount of capital a bank must hold on its books that is based on the riskiness of the activities of the bank in question.
221. See Tarullo, supra note 64, at 14. Regulatory capital requirements are consequently easily determined by financial intermediaries. Importantly, however, even these rules may be supplanted by new bankfriendly approaches (Basel II) that rely on self-evaluations and implementation by the largest and most systemically important banks.
222. See id. at 25-26.
223. This is particularly the case for principles that rely on terms that are not defined in the language of the agreement. For example, the nineteenth principle states, An effective banking supervisory system requires that supervisors develop and maintain a thorough understanding of the operations of individual banks and banking groups.
224. BASEL COMM. ON BANKING SUPERVISION, CORE PRINCIPLES FOR EFFECTIVE BANKING SUPERVISION 4 (2006), http://www.bis.org/publ/bcbs129.pdf. What this means in practice is, however, far from clear, and it will be difficult (and costly) for banks to determine without any empirical or quantitative data point.
225. This appears to be a feature germane to basic principles and standards forwarded by international standard-setting bodies.
226. See Brummer, supra note 4, at 347 (suggesting low compliance with IOSCO Principles).
227. See INT'L MONETARY FUND, IMPLEMENTATION OF THE BASEL CORE PRINCIPLES FOR EFFECTIVE BANKING SUPERVISION EXPERIENCE WITH ASSESSMENTS AND IMPLICATIONS FOR FUTURE WORK 16 (2008), http://www.imf.org/external/np/pp/eng/2008/090208.pdf.
228. Id. at 11.
229. Id. at 13. Additionally, the report mentions that lower risk weights were, at times, applied in some categories and that there is an absence of clear authority among government officials to respond to failures by banks to meet minimum capital requirements. Id.
230. Indeed, similar codes have met even less respectable fates in other sectors.
231. See Brummer, supra note 4, at 346-49 (showing low compliance of IOSCO member states with the organization's Objectives and Principles of Securities Organization).
232. INT'L ORG. OF SEC. COMM'NS, MULTILATERAL MEMORANDUM OF UNDERSTANDING CONCERNING CONSULTATION AND COOPERATION AND THE EXCHANGE OF INFORMATION 12 (2002), http://www.iosco.org/library/pubdocs/pdf/IOSCOPD126.pdf.
233. For a fuller account of the MMOU, see Brummer, supra note 4, at 366-68.
234. See Tafara & Peterson, supra note 20, at 58.
235. Brummer, supra note 4, at 373.
236. Id.
237. See INT'L ORG. OF SEC. COMM'NS, supra note 168, at 12.
238. See id. at 16-18.
239. See id. at 12.
240. See id. at 13.
241. See id. at 13.
242. In 2008, for example, only fifteen members were listed.
243. See Press Release, Int'l Org. of Sec. Comm'ns, 33rd Annual Conference of the Int'l Org. of Sec. Comm'ns (IOSCO): Final Communique (July 28, 2008), http://www.iosco.org/news/pdf/IOSCONEWS122-English.pdf.
244. See Brummer, supra note 4, at 373.
245. See id.
246. Abbott & Snidal, supra note 39, at 429.
247. Id. at 428.
248. See Chinkin, supra note 104, at 866 (noting how soft law and hard law designations disguise the role both generally play in international law);
249. see also Andrew T. Guzman & Timothy L. Meyer, International Soft Law, J. LEGAL ANALYSIS (forthcoming 2010) (manuscript at 4) (on file with author) (explaining how soft law is best described as operating along a spectrum). Indeed, a dynamic relationship between "hard" and "soft" law may exist.
250. See Gregory C. Shaffer & Mark A. Pollack, Hard vs. Soft Law: Alternatives, Complements, and Antagonists in International Governance, 94 MINN. L. REV. 706, 710-11 (2010) (noting that not only may soft law regimes be hardened through other regimes, but hard law regimes, too, can be "softened" through linkages to new and emerging soft-law principles).
251. Guzman & Meyer, supra note 183. This idea has in some ways been additionally identified by Robert Ahdieh, who identified regulatory "cues," effectively nonbinding regulatory strictures between governments, as defined along some continuum of relative coerciveness.
252. Robert B. Ahdieh, Between Mandate and Market: Contract Transition in the Shadow of the International Order, 53 EMORY L.J. 691, 743 (2004). It has also been implied in the recent work by Ryan Goodman & Derek Jinks.
253. See Ryan Goodman & Derek Jinks, How to Influence States: Socialization and International Human Rights Law, 54 DUKE L.J. 621 (2004) (noting how states can be socialized more effectively by making obligations precise and membership to some international organizations contingent).
254. See Guzman & Meyer, supra note 183, at 5.
255. See Anderson, supra note 4.
256. See generally Rüdiger Wolfrum, Legitimacy in International Law from a Legal Perspective: Some Introductory Considerations, in LEGITIMACY IN INTERNATIONAL LAW 1, 6-24 (Rüdiger Wolfrum & Volker Röben eds., 2008) (discussing legitimacy and consent in the context of international law).
257. See Tarullo, supra note 64, at 5, 21.
258. See Michael S. Barr & Geoffrey P. Miller, Global Administrative Law: The View from Basel, 17 EUR. J. INT'L L. 15, 20-31, 41 (2006). David Zaring has made similar observations regarding trends in international transparency more generally.
259. See David Zaring, Informal Procedure, Hard and Soft, in International Administration, 5 CHI. J. INT'L L. 547, 565 (2005) (describing increasing administrative law processes arising at the international level).
260. See Michael C. Dorf, Dynamic Incorporation of Foreign Law, 157 U. PA. L. REV. 103 (2008).
261. This is an issue that is pervasive in the context of the G-20.
262. See, e.g., Anthony Payne, How Many G's Are There in "Global Governance" After the Crisis? The Perspectives of the "Marginal Majority" of the World's States, 86 INT'L AFF. 729, 730-31 (2010);
263. Tony Porter, The Democratic Deficit in the Institutional Arrangements for Regulating Global Finance, 7 GLOBAL GOVERNANCE 427, 438 (2001). Mini-lateralism is, however, considered by some to be the only way of achieving any international consensus.
264. See, e.g., Moises Naim, Minilateralism: The Magic Number To Get Real International Action, FOREIGN POL'Y, July-Aug. 2009, at 136.
265. This has, perhaps not surprisingly, led to at times significant public criticism by outsiders. Indeed, at least one commentator has gone so far as to liken the evolving financial architecture as reminiscent of Prince Metternich's concert of great powers in Vienna which, among other things, was hostile to democracy and set the stage for imperial conquests later that century.
266. See Anders Aslund, Op-Ed., The Group of 20 Must Be Stopped, FIN. TIMES, Nov. 26, 2009, http://www.ft.com/cms/s/0/d0e0f214-daf5-11de-933d-00144feabdc0. html.
267. See Anderson, supra note 4.
268. Eilís Ferran & Kern Alexander, Soft Institutions and Hard-Edged Power: What Role for the European Systemic Risk Board? 162 (2010) (unpublished manuscript) (on file with author).
269. See, e.g., Cunningham, supra note 31, at 273 (noting how Japanese and some European systems have concentrated corporate ownership structures that make sophisticated legal regulations unnecessary).
270. See Roberta S. Karmel & Claire R. Kelly, The Hardening of Soft Law in Securities Regulation,BROOK. J. INT'L L. 883, 931 (2009) (noting that "a rule's legitimacy causes a compliance pull" and thus illegitimacy makes compliance less likely).
271. See JONATHAN R. MACEY, CORPORATE GOVERNANCE: PROMISES KEPT, PROMISES BROKEN 15-16, 48, 156, 166, 181 (2008).
272. This has been, in the eyes of some, especially apparent where one views the larger set of conditions the IMF has imposed on countries in crisis.
273. See STIGLITZ, supra note 13, at 44 (arguing that some economic conditions imposed by the IMF actually reduced likelihood of payment insofar as they exacerbated the short term health of the economy).
274. See U.S. GOV'T ACCOUNTABILITY OFFICE, supra note 25, at 2, 35, 40, 46, 47-48.
275. Id. at 34-35. As Dani Rodrik explains, The Basel process, viewed until recently as the apogee of international financial co-operation, has been compromised by the inadequacies of the bank-capital agreements it has produced.
276. Basel 1 ended up encouraging risky short-term borrowing, whereas Basel 2's reliance on credit ratings and banks' own models to generate risk weights for capital requirements is clearly inappropriate in light of recent experience. By neglecting the macro-prudential aspect of regulation-the possibility that individual banks may appear sound while the system as a whole is unsafe-these agreements have, if anything, magnified systemic risks.
277. Given the risk of converging on the wrong solutions yet again, it would be better to let a variety of regulatory models flourish.
278. Dani Rodrik, A Plan B for Global Finance, ECONOMIST, Mar. 14, 2009, at 80.
279. See Vanessa Blackmore & Esther Jeapes, The Global Financial Crisis: One Global Regulator or Multiple Regulators?, 4 CAPITAL MARKETS L.J. S112, S118 (2009);
280. see also FIN. SERVS. AUTH., THE TURNER REVIEW: A REGULATORY RESPONSE TO THE GLOBAL BANKING CRISIS 9 (2009) (arguing for the establishment of deeper global coordination with regard to the regulation of systemically important financial institutions);
281. GROUP OF THIRTY, FINANCIAL REFORM: A FRAMEWORK FOR FINANCIAL STABILITY 11 (2009) (arguing for enhancing existing mechanisms for international regulatory and supervisory coordination);
282. GROUP OF TWENTY, THE GLOBAL PLAN FOR RECOVERY AND REFORM 1 (2009), http://www.G20.org/Documents/final-communique.pdf (committing to establish much greater cooperation between countries and the establishment of high international regulatory standards).
283. See JOHN EATWELL & LANCE TAYLOR, GLOBAL FINANCE AT RISK: THE CASE FOR INTERNATIONAL REGULATION, at x (2000) (proposing the establishment of a World Financial Authority to act on a global level in the way that national-level financial regulators act);
284. see also FIN. SERVS. AUTH., supra note 201, at 9 (arguing for the establishment of colleges of supervisors for the largest complex and cross-border financial institutions). This is not, however, an entirely European view, especially with regard to securities law experts.
285. See Eric Pan, Challenge of International Cooperation and Institutional Design in Financial Supervision: Beyond Transgovernmental Networks, 11 CHI. J. INT'L L. 243, 283 (2010);
286. see also Eric C. Chaffee, The Internationalization of Securities Regulation: The United States Government's Role in Regulating the Global Capital Markets, 5 J. BUS. & TECH. L. 187, 191 (2010) (arguing for the centralization of international securities regulation).
287. See ALEXANDER ET AL., supra note 58, at 162, 165 (arguing for the establishment of a Global Financial Governance Council based on treaty commitments by countries to abide by the highest regulatory standards);
288. cf. Arner & Taylor, supra note 53, at 15-26 (discussing possible "hard law" approaches to international finance using the WTO, IMF and European Union or creating a new international regulatory body).
289. ALEXANDER ET AL., supra note 58, at 165.
290. See Raghuram Rajan, Reforming Global Economic and Financial Governance, in CENTRE FOR ECONOMIC POLICY RESEARCH, WHAT G20 LEADERS MUST DO TO STABILISE OUR ECONOMY AND FIX THE FINANCIAL SYSTEM 21 (Barry Eichengreen & Richard Baldwin eds., 2008), http://www.voxeu.org/reports/G20-Summit.pdf (arguing that the "financial firepower" of the IMF should be bolstered);
291. Timothy Adams & Arrigo Sadun, Op-Ed., Global Economic Council Should Oversee All, FIN. TIMES, Aug. 17, 2009, at 9, available at http://www.ft.com/ cms/s/0/f253db24-8a8b-11de-ad08-00144feabdc0.html;
292. see also GROUP OF THIRTY, supra note 201, at 11 (arguing for the strengthening of existing international mechanisms);
293. Peter Mandelson, Op-Ed., We Need Greater Global Governance, WALL ST. J., June 19, 2009, at A13, available at http://online.wsj.com/article/ SB124536757998629319.html.
294. See supra note 205.
295. Blackmore & Jeapes, supra note 201, at S113.
296. Id. at S113.
297. Dorf, supra note 190, at 103.
298. Abbott & Snidal, supra note 39, at 437 (noting that while sovereignty costs are relatively low when states make international legal commitments limiting their behavior in particular circumstances, these costs rise where states accept external authority over significant decisions and where international arrangements impinge on the relations between a state and its citizens or territory).
299. Blackmore & Jeapes, supra note 201, at S116-17.
300. Ferran & Alexander, supra note 194, at 27-30 (describing institutional weaknesses and regular failures of the Lamfalussy process at enhancing coordination).
301. Rodrik, supra note 200.
302. See id.
303. This is in large part due to the absence of formal international organizations grounded in or by treaty. Without them, it is assumed that sophisticated institutions cannot arise. This is ironic given the emphasis transgovernmentalists place on social interaction. After all, institutions have long been thought to reduce the transaction costs of coordination, and to the extent that they do, there is no reason why, if governmental networks can support policy coordination, they would not be able to support efficiency-enhancing coordination mechanisms.
304. Blackmore & Jeapes, supra note 201, at S116.
305. Mandate, FIN. STABILITY BD., http://www.financialstabilityboard.org/ about/mandate.htm (last visited Oct. 1, 2009).
306. FIN. STABILITY BD., FSB FRAMEWORK FOR STRENGTHENING ADHERENCE TO INTERNATIONAL STANDARDS 6 (2010). Furthermore, with regard to compliance with coordination, once a jurisdiction is deemed either "compliant" or "largely compliant" in two of three important relevant international cooperation and exchange principles, that jurisdiction would not require further evaluation.
307. Id. Notably, FSB member jurisdictions have additionally agreed to undergo country and thematic peer reviews. Only Mexico has as of this writing undertaken a country review, though thematic reviews have been launched with regard to a number of areas including residential mortgage underwriting practices and compensation structures.
308. See INT'L MONETARY FUND, INTEGRATING STABILITY ASSESSMENTS UNDER THE FINANCIAL SECTOR ASSESSMENT PROGRAM INTO ARTICLE IV SURVEILLANCE 23-24 (2010), http://www.imf.org/external/np/pp/eng/2010/082710.pdf.
309. In this regard, I think primarily of money laundering and terrorist financing, as seen under the FATF, but the same kind of considerations could potentially extend to instances where an international consensus has emerged that the under-regulated trading of certain unregulated financial products could undermine the global financial system.
310. As Bill Buzbee describes in broader theoretical terms, the absence of rigidly mandatory approaches enables "experimental modes of regulation" that help buffer against regulatory errors.
311. William W. Buzbee, Federal Floors, Ceilings, and the Benefits of Federalism's Institutional Diversity, in PREEMPTION CHOICE: THE THEORY, LAW, AND REALITY OF FEDERALISM'S CORE QUESTION 98 (2009).
312. Press Release, Int'l Monetary Fund, IMF Urges More Comprehensive Reform of the Global Financial System (Oct. 3, 2010), http://www.imf.org/external/np/ sec/pr/2010/pr10376.htm.
313. Between 2000 and 2002, for example, no such seminars were conducted in the United States, and seminars were conducted only once in the United Kingdom, France, Germany and China.
314. Benu Schneider, Do Global Standards and Codes Prevent Financial Crises? Some Proposals on Modifying the Standards-Based Approach 39 (United Nations Conference on Trade and Dev., Discussion Paper No. 177, 2005), http://www.unctad.org/en/docs/osgdp20051-en.pdf.
315. See Sokol, supra note 93, at 267.
316. It is worth emphasizing that because soft-law instruments bring the advantage of lower contracting costs, they may continue to perform useful roles in the coordination of global responses to global financial concerns.
317. Any agreement entails some negotiating costs-coming together, learning about the issue, bargaining, and so forth-especially when issues are unfamiliar or complex. But these costs are greater for legalized agreements.
318. Abbott & Snidal, supra note 39, at 434.
319. See, e.g., Mario Giovanoli, The Reform of the International Financial Architecture After the Global Crisis, 42 N.Y.U. J. INT'L L. & POL. 81, 89 (2009).
320. The degree to which international rules per se were a cause is, like many other issues concerning the crisis, still contested. That said, most commentators agree that inadequate capital requirements as provided for under Basel (and national banking regulations) at least contributed to the severity of the crisis.
321. Other more disputed matters concern issues like mark to mark accounting, international rules regarding the securitization of bank assets, and the widespread dependence by national and international authorities on ratings by credit rating agencies.
322. Cf. William W. Buzbee, Asymmetrical Regulation, Risk, Preemption, and the Floor/Ceiling Distinction, 82 N.Y.U. L. REV. 1547, 1607-11 (2007) (discussing regulatory risks).
323. See Brummer, supra note 4, at 371-72, 377 (discussing how new policy leaders can arise when capital is reallocated in the financial world).
324. In brief, the imposition of rules from the outside-not a new experience for most countries, as the history of colonization exemplifies-may also lead to domestic resistance.
325. Katharina Pistor, The Standardization of Law and Its Effect on Developing Countries 2 (United Nations Conference on Trade & Dev., G-24 Discussion Paper Series, Discussion Paper No. 4, 2000), http://www.idrc.ca/uploads/user-S/ 10322067830pogdsmdpbg24d4.en.pdf.
326. Dorf, supra note 190, at 156-57.
327. White House Office of the Press Sec'y, supra note 47.
328. Eric Helleiner & Stefano Pagliari, Crisis and the Reform of International Financial Regulation, in GLOBAL FINANCE IN CRISIS: THE POLITICS OF INTERNATIONAL REGULATORY CHANGE 1, 6 (Eric Helleiner et al. eds., 2010).
329. See Transcript of G 24 Press Conference, INT'L MONETARY FUND (Oct. 3, 2009), http://www.imf.org/external/np/tr/2009/tr100309a.htm (discussing a greater role for developing countries in the governance structures of theWorld Bank and IMF).
330. Payne, supra note 191, at 729-30.
331. The original G-7 countries, along with Brazil, Russia, India, and China, each have three representative members;
332. a more narrow group of mid-range powers (Austria, Mexico, the Netherlands, Spain, and South Korea) each have two members. See Links to FSB Members, FIN. SERVS. BD., http://www.financialstabilityboard.org/members/links. htm (last visited Oct. 1, 2010). All other members of the G-20 have only one member. Id.
333. This has already started to occur.
334. See Helleiner & Pagliari, supra note 232 (discussing recent moves to include more developing nations in international standard-setting organizations).