6 - The Other Networks of Financial Regulation

Summary

This chapter reviews the accomplishments of the networks that form the periphery, rather than the core, of financial regulation, and places them into the larger context of international financial regulation. It is organized around their roles in the signature post-crisis regulatory institution: The Financial Stability Board’s “Compendium of Standards,” which looks to core principles from networks beyond the Basel Commission, IOSCO, and IAIS that it views as fundamental for a well-working system of financial oversight. The existence of so many financial regulatory institutions, even if some are quite small and amount to little more than task forces within the ambit of the Basel Committee, suggests that financial regulation still remains a task-specific, disaggregated enterprise. Consider, for example, deposit insurance. It is conceivable that the Basel Committee or IAIS could develop principles for effective deposit insurance on their own; deposit insurance contributes to financial stability, which is the raison d’etre of the Basel Committee, and it’s an insurance product that insurance supervisors, in theory, understand (perhaps only in theory – deposit insurance is more commonly thought of as a tool for bank regulators). The fact that Basel and the IAIS haven’t done so is a testament to the regulatory fragmentation of financial oversight.