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The International Politics of Harmonization: The Case of Capital Market Regulation

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  • Simmons, Beth A.

Abstract

The internationalization and globalization of capital markets greatly complicates the tasks of national financial regulators. It is becoming increasingly difficult, if not impossible, to regulate the activities of banking and securities firms and the broad range of transactions in which they engage on a national level. In this article I explore the process of international regulatory harmonization in capital markets, focusing especially on the mechanisms (political pressure, market pressure, and institutional arrangements) that facilitate this process. I argue that the United States and the United Kingdom are dominant players in the capital market and that the factors most relevant for understanding harmonization processes are (1) whether other jurisdictions have incentives to emulate the regulatory innovations of the dominant financial centers, and (2) whether the dominant centers experience negative externalities in the process. These two factors shed considerable light on whether harmonization will be spurred primarily by market forces or by politics; they also suggest the likely role of international institutions in the process of regulatory harmonization. The argument is illustrated using four issue areas: capital adequacy requirements for banks, anti-money laundering rules, accounting standards, and information sharing among securities regulators.

Suggested Citation

  • Simmons, Beth A., 2001. "The International Politics of Harmonization: The Case of Capital Market Regulation," International Organization, Cambridge University Press, vol. 55(03), pages 589-620, June.
  • Handle: RePEc:cup:intorg:v:55:y:2001:i:03:p:589-620_44
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    1. Lodge, Martin & Stirton, Lindsay, 2002. "Globalisation and Regulatory Autonomy in Small Developing States: The Case of Jamaican Telecommunications Reform," Centre on Regulation and Competition (CRC) Working papers 30669, University of Manchester, Institute for Development Policy and Management (IDPM).
    2. Helleiner, Eric & Pagliari, Stefano, 2011. "The End of an Era in International Financial Regulation? A Postcrisis Research Agenda," International Organization, Cambridge University Press, vol. 65(01), pages 169-200, January.
    3. Leo F. Goodstadt, 2009. "The Global Crisis: Why Regulators Resist Reforms," Working Papers 322009, Hong Kong Institute for Monetary Research.
    4. Grasl, Maximilian, 2011. "International Financial Reporting Standards and banking regulation: A comeback of the state?," TranState Working Papers 158, University of Bremen, Collaborative Research Center 597: Transformations of the State.
    5. Tim Büthe, 2008. "Politics and institutions in the regulation of global capital: A review article," The Review of International Organizations, Springer, vol. 3(2), pages 207-220, June.
    6. Collier, Benjamin, 2013. "Exclusive finance: How unmanaged systemic risk continues to limit financial services for the poor in a booming sector," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150433, Agricultural and Applied Economics Association.
    7. Barry Eichengreen & Hans-Joachim Voth, 2003. "Symposium on capital controls," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 8(3), pages 185-187.
    8. Nedelchev, Miroslav, 2015. "Coordination of banking regulation in the EU," MPRA Paper 66073, University Library of Munich, Germany, revised 2015.
    9. Pistor Katharina, 2012. "Governing Interdependent Financial Systems: Lessons from the Vienna Initiative," Journal of Globalization and Development, De Gruyter, vol. 2(2), pages 1-25, January.
    10. Palea, Vera, 2014. "Financial Reporting for Varieties of Capitalism: The Case Against a Single Set of International Financial Reporting Standards," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201442, University of Turin.
    11. repec:spr:climat:v:144:y:2017:i:1:d:10.1007_s10584-015-1481-4 is not listed on IDEAS
    12. Yuko Suda, 2013. "Transatlantic Politics of Data Transfer: Extraterritoriality, Counter-Extraterritoriality and Counter-Terrorism," Journal of Common Market Studies, Wiley Blackwell, vol. 51(4), pages 772-788, July.
    13. Bouvatier, Vincent, 2014. "Heterogeneous bank regulatory standards and the cross-border supply of financial services," Economic Modelling, Elsevier, vol. 40(C), pages 342-354.
    14. Lukas Hakelberg, 2014. "The Power Politics of International Tax Cooperation. Why Luxembourg and Austria accepted automatic exchange of information on foreign account holders’ interest income," EUI-RSCAS Working Papers p0375, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
    15. Jan Thomas Martini & Rainer Niemann & Dirk Simons, 2007. "Transfer Pricing or Formula Apportionment? Tax-Induced Distortions of Multinationals’ Investment and Production Decisions," CESifo Working Paper Series 2020, CESifo Group Munich.
    16. Singleton,John, 2010. "Central Banking in the Twentieth Century," Cambridge Books, Cambridge University Press, number 9780521899093, May.
    17. Winecoff William Kindred, 2015. "Structural power and the global financial crisis: a network analytical approach," Business and Politics, De Gruyter, vol. 17(3), pages 495-525, October.
    18. Asif Efrat, 2016. "Promoting trade through private law: Explaining international legal harmonization," The Review of International Organizations, Springer, vol. 11(3), pages 311-336, September.
    19. Martini, Jan Thomas & Niemann, Rainer & Simons, Dirk, 2007. "Transfer pricing or formula apportionment? Tax-induced distortions of multinationals' investment and production decisions," arqus Discussion Papers in Quantitative Tax Research 27, arqus - Arbeitskreis Quantitative Steuerlehre.
    20. Alon, Anna & Dwyer, Peggy D., 2016. "SEC's acceptance of IFRS-based financial reporting: An examination based in institutional theory," Accounting, Organizations and Society, Elsevier, vol. 48(C), pages 1-16.
    21. Schwarz, Peter, 2011. "Money launderers and tax havens: Two sides of the same coin?," International Review of Law and Economics, Elsevier, vol. 31(1), pages 37-47, March.
    22. Robert Falkner & Aarti Gupta, 2009. "The limits of regulatory convergence: globalization and GMO politics in the south," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 9(2), pages 113-133, May.
    23. Concha Verdugo Yepes, 2011. "Compliance with the AM+L4776L/CFT International Standard; Lessons from a Cross-Country Analysis," IMF Working Papers 11/177, International Monetary Fund.

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