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The Panel debated the interaction between the Dodd-Frank Wall Street Reform and Consumer Protection Act 2010 (Dodd-Frank Act) and international law.
In his overview of the issue, Professor David Zaring outlined key areas where these interactions were most meaningful. He noted that the Dodd-Frank Act expressly mandates that domestic U.S. regulators cooperate with their foreign counterparts in developing and implementing regulation. This move reflects Congressional concern about the global nature of financial risk-taking and the necessity of cooperation to ensure that domestic legal systems manage such risks in a manner that is most robust. Professor Zaring also emphasized that the Dodd-Frank Act contains provisions that seek to reflect international human rights norms, notably in the area of disclosure of certain conflict minerals from Congo and neighboring nations.
Professor Michael Barr provided insights into the nature of the global financial governance order. He traced the arc through which international financial regulation developed under the Bretton Woods system through to the modern architecture which is defined by the work of technocratic international standard-setting bodies like the Basel Committee on Banking Supervision and the International Organization of Securities Commissions. Professor Barr noted that the pre-Crisis design of the international regulatory order had been found lacking and needed reform to ensure that it could better predict, prevent and contain future crises. Professor Barr presented the benefits of cooperation as well as the challenges that it entails as national regulators follow varying pathways to implementation of global standards.
Professor Jonathan Macey focused in on the issue of why global regulators are able to coordinate very meaningfully in certain areas but cannot do so in other areas of international finance. He examined the depth of cooperation seen in the context of the Basel capital accords and contrasted this with the failure of international regulators to reach consensus on bank resolution frameworks. Professor Macey argued that nations had considerable private benefits to gain from cooperating on bank capital, especially as their banks could then compete internationally on an even basis. By contrast, such self-interest is missing in the case of bank resolution. Importantly, countries may wish to have discretion to ring fence an international bank’s assets at home to provide a basis for protecting local creditors and depositors. He also suggested that bank capital structures, where national governments are often big (if not the biggest) creditors generate challenges to cooperation.
Finally, Professor Brummer outlined the importance of his idea of “minilateralism” in global finance. As he analyzes in his new book, Minilateralism: How Trade Alliances, Soft Law and Financial Engineering are Re-shaping Economic Statecraft (Cambridge, 2014), countries are increasingly cooperating by way of small clubs, rather than necessarily through larger multi-lateral groupings. Professor Brummer highlighted the distributive impact of global governance structures that may not always impact all countries equally, such that it may be costlier for some to comply with the international agenda or where national preferences may to seek to add on extra standards to the ones already agreed. He outlined the importance of minilateralism in this context to showcase the workings of smaller national regulatory clubs in implementing global financial regulatory standards.
The session ended with a lively Q&A session.
Yesha Yadav is a professor at Vanderbilt Law School, focusing on international financial and securities regulation.