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1 1 (October 17, 2017)

handle is hein.crs/govcbyx0001 and id is 1 raw text is: FF.ri E~$~ & Updated October 17, 2017 Introduction to Financial Services: International Supervision Over the past several decades, global capital flows have grown rapidly, driven by deregulation of national financial sectors, advances in technology, and innovation of financial products and instruments. The financial crisis of 2007-2008 and subsequent global economic turmoil underscored the interconnectedness of the global financial system as well as its weaknesses. While financial markets have become more global, financial regulation remains domestic, exercised by national governments over financial transactions occurring within their geographic borders. In the wake of the crisis, leaders from the United States and other countries have pursued a wide range of reforms to the international financial regulatory system. At a basic level, the goal of international financial regulation is to maximize economic gains from integrating global financial markets while minimizing losses from instability and financial crises. International financial stability is a policy objective that transcends national boundaries. In the absence of an international financial supervisory or regulatory body, countries, for the past several decades, have negotiated voluntary international financial standards and best practices. Despite decades of efforts among national regulators to agree on and coordinate international standards on accounting, securities, and bank capital adequacy among the major economies, substantial regulatory differences exist among national regulations. Furthermore, the absence of an institution with the authority to conduct prudential supervision of transnational financial institutions may have contributed to the failure to prevent the 2007-2008 crisis and hampered efforts to contain the spread of financial instability throughout the global economy in the years following the crisis. %.Cur'reknt Lan dc-apM- In contrast to the rules-based system for governing international trade, centered on the World Trade Organization (WTO), international financial regulation is fragmented, with regulatory and supervisory authority dispersed among a range of international and national institutions (Figure 1). The overall agenda-setting for international financial cooperation and coordination is most associated with the Group of 20 (G-20) and the Financial Stability Board (FSB). National financial authorities are the primary actors, responsible for devising rules and providing oversight and supervision of financial institutions operating under their jurisdiction. National financial authorities are also responsible for participating in the international standard- setting bodies. The international agenda and standard- setting bodies operate on a consensual basis and have no legally binding authority. Since national regulators (or other authorities) cannot enter into treaties with other countries, agreements made at international fora or by regulators at standard-setting bodies require domestic legislative and/or regulatory changes before they are implemented. International financial institutions, primarily the International Monetary Fund (IMF) provide overall surveillance of national compliance with the agreed upon international financial standards, among its other functions. Figure I. International Financial Architecture iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii .iiiiiiiiiiiiiiiiii . iiiiiiiiiiiiiiiiii ................ ' ......................... :.. ................... . . ................. nratkia econmi cooperati.G-2 Meaders me *rogupaly ofe 2(G-20) he 6-2 atoiy an iomals grupisn oinetmemen monrieconomihes, (inacludinter Und Setas an thefuroan Unithoghih sic2009 haseo intentonal nectonmi cooperion.reg6-20r laersdmee Th annanumits. Fnanceit minsr oFficialsTetF more creulay The 6-20 asenoa audtht roritips es onh itmernounrisaRthr financilsadd-eminiteroes. and centr bankcials wheuor ro the 6-20 tougreso (an gohr) eeal international financial regultorytgenda *nthe inancialoStailty Boanard (sB).in ThdeFis ag. techonial bdynwich, wasnsablshdcyth)620t coordinat hes 6-2 agpendaor andsthepiortiesulforth (aohers), sevpelopinwt internationallfianiaaintiuton standards. The primary U.S. representatives to the FSB are the Federal Reserve, the Securities and Exchange K~:> mppm qq\ a ' p\w -- ' gn'w', g-o I 'S 11LULANUALiN,

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