Financial markets have become increasingly interconnected with financial intermediaries and instruments linking local and national markets to form regional or even global ones. The global financial crisis of 2008 demonstrated once more that financial interdependence can be both a blessing and a curse. It facilitates the movement of capital and the expansion of credit, and as such promotes economic development in good times; however, in bad times it transmits liquidity shortages throughout the system triggering financial crises and economic recessions where credit expansion earlier fuelled expansion and growth. A critical question therefore is how to structure the governance of transnational finance. The chapter identifies three types of governance regimes that have been tried and tested in the past or are up for testing now: a laissez-faire regime, a coordinative, and a centralized regime. The chapter analyzes the effects of these regimes on integration versus disintegration in light of finance’s inherent instability.
Finance and Financial Management | International Business | Law
Transnational Regulatory Regimes in Finance: A Comparative Analysis of Their (Dis-)Integrative Effects,
Leveling the Playing Field: Transnational Regulatory Integration and Development, Laszlo Bruszt & Gerald A. McDermott (Eds.), Oxford University Press
Available at: https://scholarship.law.columbia.edu/faculty_scholarship/4344