The global financial crisis triggered a debate about the redesigning of NIFA (especially among the G-20 and FSB). As before the financial crisis turned to be catalyst for changes. The reforming of the NIFA is a very difficult and complex process. The benefits from establishing the new framework for global financial stability are widely accepted but the necessity of resignation from particularistic
8 B. Eichengreen: From the Asian crisis…, op. cit. p. 5.
9 See J. Crotty: Structural causes of the global financial crisis: a critical assessment of the ‘new financial architecture’. Working Paper Series 2008, Political Economy Research Institute, Uni-versity of Massachusetts, No 180.
10 See B. Eichengreen: From the Asian crisis…, op. cit. and Mohan R: Global financial crisis – causes, impact, policy responses and lessons. Speech at the 7th Annual India Business Forum Conference, London Business School, London, 23 April 2009, http://www.bis.org/review/
r090506d.pdf, 10.01.2012.
The new international financial architecture and the global financial crisis… 133
interests is not so obvious and unproblematic. Also uncertain is the participation of emerging and developing countries in the process of reforming the NIFA.
The process of the reforming the NIFA must involve three crucial elements:
financial regulatory framework, financial supervision and international financial institutions. There are of course identified other important issues for the NIFA to address, including the problem of the international crisis management and reso-lution frameworks.
Analyzing the problem of financial regulation it should be stated that the global financial system requires rather „better regulation” than „more regula-tion”. And what is essential – the regulation which involves the effective super-vision (regulation means „rules-setting”, and supersuper-vision – monitoring if the rules are complied with). Because the regulation and supervision are strictly in-terconnected.
In the increasingly globalized financial system the regulation cannot remain a national concern and the rules must be obeyed internationally. After the crisis it became apparent that the recommendations had too week influence on the be-havior of the financial industry. This surely requires close cooperation among regulators, supervisors, governments and financial institutions. The very impor-tant feature of the reformed regulatory framework is that it should address the fundamental sources of systemic risk. The most important issues for regulation in this area are: more robust financial infrastructure (especially payment and set-tlement systems), existence of rules and incentives to improve management of financial institutions (through i.a. effective corporate governance and risk man-agement systems), transparency and disclosure requirements for financial institu-tions, markets and products for supporting market discipline and minimizing the problem of information asymmetries, need for prudential regulation (especially macroprudential)11. The global financial crisis has proved that microprudential regulation, which focuses on the risks within individual institutions, was insuffi-cient to prevent systemic risks, because it does not address the externalities of common exposures and procyclicality. These threats to systemic stability can be limited through macroprudential regulatory tools, such as i. a. capital require-ments, provisioning, leverage ratios12.
In the area of regulation (and also supervision) special attention must also be paid to the problems of banks’ capital and liquidity, credit risk quality and its pricing, excessive leverage (which is also a part of the problem of procyclical-ity). It must be mentioned that the use of capital requirements on banks cannot serve as „undifferentiated response to systemic risk”, because to high costs can
11 D.W. Arner: Adaptation and resilience in global financial regulation. University of Hong Kong, Faculty of Lae Research Paper 2011, No 007, p. 105-107.
12 BIS, 79th Annual Report. Bank for International Settlements, Basel, June 2009, p. 128-129.
Krystyna Mitręga-Niestrój 134
drive institutions into „shadow” areas of financial system. Another important is-sue is the functioning of the OTC derivatives markets, and here especially strengthening the resilience and transparency of these markets and reducing their systemic risks. Also important is that the regulation and supervision should con-cern wider range of financial institutions such as hedge, private equity and money market mutual funds, and also service providers – credit rating agencies, auditing firms, clearing and settlements system13. The significant changes are needed to regulatory treatment of the securitization. The next problem is the regulation of systemically important financial institutions (SIFIs) and global SI-FIs (G-SISI-FIs) and the resolution of financial institutions. The changes in the compensation practices are essential in the financial sector through implementa-tion of compensaimplementa-tion principles and standards. The not resolved problem is still the functioning of offshore-centers.
The crucial element of the NIFA reform, which has been already mentioned, is financial supervision. The global financial crisis proved that the new philoso-phy of the supervision is needed all over the world. There are even proposals to create a global mega-supervisor. But it is a complicated idea, multifaceted, and no doubt – highly debatable14. The idea derives i.a. from the current state of the international supervision architecture – which consists of many formal and in-formal actors, what creates problems of co-ordination and co-operation. The functioning of such a global supervisor is still a thing of the future (maybe at the begging it should be a global supervision coordinator). The most important issue seems to be reinforcement of national (or regional if it is possible like in the EU) financial supervisory authorities which should act according to widely accepted and applied rules and procedures. The important problems in the area of supervi-sion are: the choice of the model of supervisupervi-sion – propositions to further integra-tion of insurance, securities and banking supervisors, the role of the central bank in systemic supervision and its role as the lender of last resort, the need of limi-tation macro supervisor’s reliance on self-regulation exercised by market institu-tions, the problem of relations between micro- and macro-supervision and among supervisors and its agents (especially the instruments used for motiva-tion), the question of independency of financial supervisor (involving the prob-lem of accountability and transparency)15. The changes in financial systems call for oversighting of a much wider range of financial entities. Very important is also to effectively counteract the regulatory and supervisory arbitrage and gaps.
13 A. Crockett: Rebuilding the financial architecture. „Finance & Development” September 2009, Vol. 46, No 3, p. 18-19.
14 The threats connected with functioning of such a supervisor could be: too much bureaucracy, little elasticity, high costs, dangers of political pressure.
15 L. Garicano, R.M. Lastra: Towards a new architecture for financial stability: seven principles.
„Journal of International Economic Law” 2010, Vol. 13 No. 3.
The new international financial architecture and the global financial crisis… 135
The efforts to improve financial supervision at the international level require stronger cooperation, coordination and improvement of information flows be-tween national supervisors.
The next essential element of the NIFA „rebuilding” is its institutional part.
The functioning of i.a the International Monetary Fund, Bank for International Settlements or Financial Stability Board needs deep analysis, and in particular the problems of their legitimacy, focus, share of responsibilities and the effec-tiveness of their recommendations and decisions. Therefore unresolved is the problem of the future model of the global financial governance.
Conclusions
The main aim of the NIFA, which was built as a result of the crises at the end of the XX century, was safeguarding financial stability, first of all in the de-veloping countries. But the global financial crisis 2008-2009 had its roots in the weaknesses of the financial systems of the highly developed countries. What is more, the NIFA prepared the ground for that crisis. There is a debate now on the NIFA reform, especially in three areas: financial regulations, supervision and in-ternational institutions. There is some doubt about the depth and scope of the re-form – if it will be only a „renovation of the facade” or an „advanced reconstruc-tion” and whose interests will the reformed NIFA serve.
References
Arner D.W.: Adaptation and resilience in global financial regulation. University of Hong Kong, Faculty of Lae Research Paper 2011, No. 007.
BIS, 79th annual report. Bank for International Settlements, Basel, June 2009.
Cady J.: Does SDDS subscription reduce borrowing costs for emerging market econo-mies? „IMF Working Papers” 2004, WP/04/58.
Crockett A.: Rebuilding the financial architecture. „Finance & Development” Septem-ber 2009, Vol. 46, No. 3.
Crotty J.: Structural causes of the global financial crisis: a critical assessment of the
‘new financial architecture’. Working Paper Series 2008, Political Economy Research Institute, University of Massachusetts, No. 180.
Eichengreen B.: Toward a new international financial architecture: A practical Post-Asia agenda. Institute for International Economics, Washington 1999.
Eichengreen B.: From the Asian crisis to the global credit crisis: reforming the interna-tional financial architecture redux. „Internainterna-tional Economics and Economic Policy” 2009, Vol. 6.
Krystyna Mitręga-Niestrój 136
The Financial Sector Assessment Program (FSAP). IMF, 2 September 2011, http://www.imf.org/external/np/exr/facts/fsap.htm, 06.01.2012.
Garicano L., Lastra R.M.: Towards a new architecture for financial stability: seven prin-ciples. „Journal of International Economic Law” 2010, Vol. 13, No. 3.
Glennerster R., Shin Y.: Does transparency pay? „IMF Staff Papers” 2008, Vol. 55, No. 1.
Higher level of international cooperation needed to tackle crisis facing global economic system. Managing Director’s Opening Address, „IMF Survey” 19 October 1998.
Mohan R: Global financial crisis – causes, impact, policy responses and lessons. Speech at the 7th Annual India Business Forum Conference, London Business School, London, 23 April 2009, http://www.bis.org/review/r090506d.pdf, 10.01.2012.
13. Walter N.: Briefing paper: How to restructure the international financial architec-ture?
http://www.europarl.europa.eu/document/activities/cont/200901/20090123ATT470 35/20090123ATT47035EN.pdf, 09.01.2012.
NOWA MIĘDZYNARODOWA ARCHITEKTURA FINANSOWA I ŚWIATOWY KRYZYS FINANSOWY – KILKA SPOSTRZEŻEŃ
Streszczenie
Artykuł podejmuje problem nowej międzynarodowej architektury finansowej (NMAF), która została wprowadzona w następstwie kryzysów lat 90. XX wieku, w celu zapewnienia stabilności międzynarodowego systemu finansowego. Konstrukcja NMAF wynikała głównie z doświadczeń kryzysów w krajach rozwijających się i nie uchroniła światowych finansów przed kryzysem 2008 roku. Można stwierdzić, że pewne elementy NMAF stworzyły warunki dla wzrostu wrażliwości systemów finansowych w skali mię-dzynarodowej. Pojawienie się globalnego kryzysu finansowego spowodowało ponowną debatę na temat NMAF. Nierzadkie są opinie, że wymaga ona daleko idących zmian, przede wszystkim w obszarze międzynarodowych regulacji finansowych, nadzoru oraz funkcjonowania międzynarodowych instytucji finansowych. Trudno dziś stwierdzić, jak głębokie będą zmiany w konstrukcji międzynarodowych finansów, czyim interesom bę-dą one służyć i co najważniejsze, czy uchronią przed kolejnym światowym kryzysem fi-nansowym.