International Financial Regulation, Access to Finance, Systemic Stability, and Development

Global financial markets are subject to a complex web of soft law rules and standards called International Financial Regulation. The main rationales/objectives of International Financial Regulation revolve around the protection of investors and depositors and the safeguarding of financial system stability. In recent months International Financial Regulation has come under attack for its lack of proper structures and flawed rules, which have been held to be among the main causes of the global financial crisis. In the aftermath of the Washington Financial Summit of November 2008, significant reforms are under way. In this context, this article argues that International Financial Regulation must undergo a major transformation in terms of means and objectives. The policy objectives of International Financial Regulation must be widened to reflect the impact of financial sector development and access to finance on economic growth and poverty eradication. As part of the transformation of its means (institutional structures and rules) the article proposes the establishment of a global licensing scheme for international investment funds, whereby licensed funds would be obliged to pay a global development tax/fee. It also proposes, as part of the wider effort to reform Basel Capital Adequacy Standards, in the aftermath of the global financial crisis, the introduction of a new asset class for private development finance credits. Implementation of these proposals would enable International Financial Regulation to both strengthen the global financial stability framework and facilitate access to finance in poor and very poor countries fostering economic development and creating a more stable world