The Role of Transparency in Financial Regulation

Transparency is a prerequisite for good governance and sound financial regulation. The article expounds the different foundations and functions of transparency. The first dimension refers to <em>institutional</em> aspects, i.e. procedures and decision-making. By providing legal certainty, transparency serves as an <em>anchor</em> for financial regulation. It is the basis for establishing trust, which is the key element of any financial system. In its second dimension, transparency is understood as the <em>substantive</em> backbone of financial regulation. It lays open the values and goals of financial policy and regulation. The third dimension is <em>accountability</em> of actors as an essential element for rebuilding confidence in the financial system. Finally, the concept of transparency as suggested here cannot be isolated from international developments. The article proposes that turning to the principles applied under the General Agreement on Trade in Services for defining a set of applicable international standards for financial services may be an avenue to be pursued and explored in the future.