Columbia International Affairs Online: Working Papers

CIAO DATE: 02/2013

Another Fine Mess: Repairing the Governance of International Financial Regulation

Pierre Siklos

January 2013

Centre for International Governance Innovation

Abstract

Five years after the fall, policy makers seemingly continue to believe that the severity of any crisis-led downturn can be divorced from its source. There is too little appreciation that earlier international monetary systems required cooperation precisely because exchange rate systems rendered economies dependent on collaboration between the participants. This paper argues that credibility and trust in any new international regulatory framework must first begin at home with a determination for fiscal and monetary policies to work in harmony. This includes cooperation, if not coordination, of regulatory and supervisory functions to ensure that macro-prudential policies effectively complement domestic monetary policy and provide an additional tool to implement a sound macroeconomic framework that will soften the blow from the next financial crisis.