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.