Global Business . Article Summary – Article Example
The article A new architecture for global financial regulation discusses ways to achieve global growth. The setting of the article takes place at theG20 summit. The diplomats that attended the summit believed that the best way to achieve global growth is through the development of new global regulations for the financial markets. According to the authors of the article the only way to achieve new regulation is by starting from scratch and developing a brand new global architecture for the regulation of finance and banking. The new architecture must include the following three elements: broad representation in the rule-making process, proper monitoring, and systematic enforcement.
The current rule making mechanism occurs through a committee called the Basel Committee on Banking Regulation. There are only 13 countries represented by officials in the committee. The members of the committee are easily corrupted and influenced by powerful players in the banking industry, thus real change never occurs. There is resistance to change to any initiative that may hurt the profits of bankers. The rule making process requires greater participation of other countries and diverse stakeholders. There needs to be better monitoring of banks, financial institutions, and of the regulatory bodies in order to ensure the accountability of their actions. During the G20 summit there was a proposal for the establishment of international supervisory colleges for all major cross-border financial institutions. The third element of the plan to create actual change in the system is the creation of a special international judicial institution that will be responsible for enforcing the new rules and regulations.
1. What is the reason why change has been so hard to come by in the banking and finance industry?
2. Do you think the creation of new architecture for global financial regulation is needed? Why?
Mattli, W., Woods, N. (2008). A new architecture for global financial regulation. Financial Times.