Lessons from Other Society-sensitive Sectors for a Financial Regulatory Regime

Since the outbreak of the financial crisis, international financial regulation has been a hotly debated topic. Substantive rules are questioned, supervisory authorities tackled and new architectural rules asked for. Expert reports made available could already fill libraries, and legislators are under considerable pressure to present reform proposals as soon as possible.
During the recent years, not only new rules but also new regulators have emerged mainly on a “half-governmental level”, because established international bodies were not capable to react as quickly as necessary and state regulators only have restricted competences in cross-border matters. In the meantime, the manifold activities and actors in the field of international financial regulation make it almost impossible to overlook the large number of (possibly) applicable rules.¹  Nevertheless, the dense network of financial standards was not able to prevent the financial crisis in the United States from spreading out to the rest of the world.
In view of its multiplicity, financial regulation may be defined as supervisory function or authority having a diverse character, not only because of the different financial functions, but also because of differences per country.²  Financial regulation can be enacted by both governmental authorities such as parliaments, executive bodies and public institutions or self-regulatory agencies; the latter either have a delegated competence to devise regulations or impose such regulations on the members of a specific market sector in a non-mandatory way.
International financial regulation can be divided into three subsets of rules, namely (a) systematic or institutional rules, regulating the performance of financial institutions, (b) rules ensuring safety, systemic stability and market conduct and (c) rules pertaining to supervision in the form of self-control, industry supervision or public supervision.³ The focus of financial regulation lays on crisis prevention and maintenance of financial stability, meaning the safety and soundness of the financial system. A further concern in financial services regulation is consumer protection: The relationship between financial intermediaries and their customers has become an important element of financial regulation. Not only is an integrated, however, not excessive financial regulation system essential for the functioning of the financial market, but also will it enhance market players’ acceptance of regulatory interventions. Many voices call now (again) for a new international financial architecture. Experts all over the world try to develop a framework which would be designed to prevent further crises. However, a certain weakness of this approach consists in the fact that financial experts do not necessarily take into account the experiences which have been made with regulatory structures in other fields. Subsequently, Internet regulation will be looked at as a comparative example for the development of a sound financial regulatory framework. Similar to the Internet, financial markets have gained a global dimension over the past decades, affecting and involving an increasing number of “participants”.

¹ Weber, Rolf H., Mapping and Structuring Internatinal Financial Regulation – A Theoretical Approach, European Banking Law Review 2009, 651.
² Dalhuisen, Jan H., Dalhuisen on International Commercial, Financial and Trade Law, Oxford 2004, 908.
³ Weber (Fn 1), 653.