The International Law of Financial Crisis: Spillovers, Subsidiarity, Fragmentation and Cooperation

This article develops an analytical template for examining possible mechanisms for the avoidance and management of international financial crisis, focusing on certain areas of prudential financial regulation. This template examines questions of national regulatory policy reform, reasons for international cooperation and problems of cross-functional fragmentation. There is no evidence yet of beneficial regulatory competition in the case of this crisis. Shareholders and creditors do not seem systematically to have identified regulatory inadequacies, and migrated to stronger regulatory environments. So, competition-based discipline on lax regulation seems not to have worked. In order for each state to reduce risk through regulatory reform, states must work together to avoid cross-border harm that is not fully taken into account in national decision-making, and to avoid detrimental regulatory competition. They must work together to make rules, but they must recognize that our vision of the future is limited, and so they must establish institutions that will allow them to revise rules and institutions, as necessitated by unfolding change. Oxford University Press 2010, all rights reserved, Oxford University Press.