Dissonance in Global Financial Law

This article explores whether the post-GFC global financial architecture is likely to provide efficient regulation capable of preventing a future crisis from occurring. The article starts with a brief overview of the emergence in the 1970s of global financial architecture. A thorough descriptive analysis of the post-crisis architecture follows, raising serious doubts regarding the current architecture’s ability to accomplish its goal. This analysis is performed in two stages, taking first an outsider’s perspective on the changes the architecture underwent after the crisis and moving then to the inside — the structure and contents of the architecture. Using macro-prudential methodological tools, the establishment of the Financial Stability Board is reviewed, along with three cutting edge regulations: the Basel III framework for banking, the IOSCO’s recommendation for money market funds, and the FSB’s recommendations regarding repurchase agreements. Pointing out the architecture’s perceived failure to provide stability due to severe regulatory arbitrage, the article then widens the lens to explore the implications of the above regulation. The article suggests that the current architecture encourages ‘financialisation’ and pushes the financial system and the real economy further apart. Consequently, the article raises normative concerns regarding the legal foundations of the global financial architecture, and its legitimacy.