What Role for the New Financial Stability Board? The Politics of International Standards after the Crisis
| Author | Eric Helleiner |
| Published date | 01 October 2010 |
| DOI | http://doi.org/10.1111/j.1758-5899.2010.00040.x |
| Date | 01 October 2010 |
What Role for the New Financial
Stability Board? The Politics of
International Standards after the Crisis
Eric Helleiner
Department of Political Science, University of Waterloo
Abstract
Created in April 2009, the Financial Stability Board
(FSB) represents the G20 leaders’ first major
international institutional innovation. Why was it
established and what role will it play in global
economic governance? The creation of the FSB has
been linked to a US-led effort to strengthen an
international prudential standards regime that had
evolved in the years leading up to the 2007–08 global
financial crisis. The FSB faces a number of serious
challenges in its new role: developing effective
mechanisms for monitoring and encouraging
compliance; promoting the development of effective
international standards and fostering consensus on
their content; establishing its legitimacy vis-a
`-vis non-
members and within member countries; and clarifying
its relationship with other global governance
institutions. Since these are very difficult tasks, the
FSB may be forced to assume a less ambitious role in
international regulatory politics than some of its
creators initially envisioned.
Policy Implications
•The creation of the FSB is part of an ambitious
effort to strengthen international prudential stan-
dards in response to the recent global financial
crisis.
•The FSB faces many challenges: developing effec-
tive mechanisms for monitoring and encouraging
compliance; promoting the development of effec-
tive international standards and fostering consensus
on their content; establishing its legitimacy vis-
a
`-vis non-members and within member countries;
and clarifying its relationship with other global
governance institutions.
•If these challenges prove too daunting, the FSB
can still play an important, though less ambitious,
role of fostering international cooperation to sup-
port a more pluralistic and decentralized interna-
tional regulatory order.
Created in April 2009, the Financial Stability Board (FSB)
represents the G20 leaders’ first major international institu-
tional innovation. Why was it established and what role
will it play in global economic governance? While the FSB
has been assigned a number of tasks, this article focuses on
what is probably the most important one: the strengthening
of international prudential financial regulation. After
describing the emergence of an international standards
regime before the crisis, the article explores how the crea-
tion of the FSB has been linked to a renewed effort to
strengthen this regime. This initiative has been led by US
officials and supported to date by the rest of the G20 for
some specific reasons that are highlighted briefly. The arti-
cle then outlines a number of challenges that the FSB faces
in its new role: developing effective mechanisms for moni-
toring and encouraging compliance; promoting the devel-
opment of effective international standards and fostering
consensus on their content; establishing its legitimacy
vis-a
`-vis non-members and within member countries; and
clarifying its relationship with other global governance
institutions. Since these are very difficult tasks, the article
ends with some speculations about an alternative role that
the FSB could assume which would be less ambitious but
not necessarily less supportive of global financial stability.
The emergence of the international standards
regime
Efforts to create international prudential financial standards
began over two decades ago with the negotiation of the 1988
Basel Accord on bank capital adequacy by the Basel Com-
mittee on Banking Supervision (BCBS). In the wake of the
1994 Mexican crisis and the 1997–98 international financial
crisis, initiatives to strengthen and promote international
financial standards greatly intensified at the urging of G7
policy makers who believed that the crises had stemmed lar-
gely from poor supervisory and regulatory practices in devel-
oping countries (Helleiner and Pagliari, forthcoming; Porter,
2005; Walter, 2008). During this period, many new interna-
tional standards – often drawing on US and British practices
Global Policy Volume 1 . Issue 3 . October 2010
Copyright 2010 London School of Economics and Political Science and John Wiley & Sons Ltd. Global Policy (2010) 1:3 doi: 10.1111/j.1758-5899.2010.00040.x
Research Article
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