Abstract:
The objective of this paper is to provide a balanced assessment of international
cooperation among financial regulators, with a focus on banking supervision.
While recognizing the undeniable and even unexpected achievements
of these regulators in building a cooperative framework for financial
supervision, we also suggest that this remains a work in progress, given the
contemporary financial risk environment. Briefly, we argue that this
environment to the extent we understand it, for it remains opaque in
important respects has an almost paradoxical quality, in that risk has
become both more consolidated and more atomized at the same time. On the one
hand, large and complex financial institutions (LCFIs) which may be "too
big to fail", increasingly dominate the banking landscape; on the other,
these same institutions have shifted at least a portion of their risks onto
other firms and households, whose absorptive capacity has yet to be severely
tested. It is the effectiveness of the international supervisory architecture
in the face of this risk environment that we consider, and we then provide some
suggestions for future policy reforms.
Keywords: International cooperation, financial stability, central banks, banking
supervision, regulation