Friday, June 27, 2014

Volcker and Barnier Call for Treaty-Like Treatment of Cross-Border Financial Regulation Harmonization

Two prominent figures on different sides of the Atlantic have recently called for elevating the convergence of U.S. and E.U. financial regulations, especially in the area of cross-border derivatives, to treaty-like treatment. Michel Barnier, E.U. Commissioner for the Internal Market, called for including the cross-border convergence of financial regulations in the trade negotiations underway between the U.S and the E.U. And, in a recent speech, former Fed Chair Paul Volcker called for Bretton Woods type treatment of cross-border financial regulations, essentially calling for a Bretton  Woods Conference on financial regulation.

Despite the G20 calling for cross-border convergence and cooperation on financial regulation, Dodd-Frank Act provisions directing cross-border harmonization of the regulations implementing its provisions, and despite general jawboning that this was a global financial crisis that needs a global solution with globally coordinated regulations, it is really not happening because there is no enforceable mandate or mechanism to make it happen. I believe that this is what Commissioner Barnier and former Fed Chair Volcker have perceived and hence their calls for a Treaty and international agreements between sovereigns. In fact, sovereignty was also going to be the main roadblock to global harmonization and congruence of financial regulations. As I recall, Chairman Frank predicted this at the time of the enactment of Dodd-Frank Act. Despite increasing globalization, national sovereignty is still a powerful force. So, I believe Paul Volcker and Michel Barnier are correct in trying to elevate this issue to a Treaty level.