6 - Global Finance: Regulatory Challenges

Leader: The Hebrew University of Jerusalem (HUJI)

Objectives

Finance is increasingly globalized, as activities and projects around the world benefit from the liberalized circulation of capital. This enhanced liquidity, however, comes with a number of risks, such as increasingly unsustainable debts, opacity of transactions and financial products, tax evasion, the systemic risks of failure due to the interrelation of actors and the instability of some emerging countries. Additional issues include the allocation of responsibility for the potential economic impact of failure. This was demonstrated by the financial crisis of the late 2000s, which degenerated into a worldwide economic crisis. No central global financial institution exists to adopt and enforce global rules on finance, but a number of regimes and institutions have emerged though the approaches to global financial regulation still differ widely, torn between a hands-off (self-regulation) and a hands-on approach. The EU is very active in this domain. While new creditors are emerging so are other (informal) bodies such as the G20 or the Financial Stability Board. The WP’s objectives are to:

  • Map and make sense of the risks posed by global finance, and map the official and informal regimes and institutions which now govern global finance.
  • Closely study institutional developments in global finance, such as the Financial Stability Board in particular to understand whether and how they, in conjunction with the EU policies on banking and finance, contribute to an effective global prudential regime.
  • Understand how global finance impacts a wider range of issues and stakeholders, such as the financial stability of states, organizations and individuals and their effect on economic growth and inequality.
    Understand how the rise of new creditors with concomitant new credit policies are affecting global financial governance.