Just after the Lehman Brother collapse, financial regulatory reform was at the top of the global agenda, and it dominated the discussion at the first summit of G-20 leaders in November 2008. By contrast, it was little more than an afterthought in the last G-20 meeting in Paris last month. Many observers fret that the financial industry has reverted back to its pre-crisis business-as-usual mode. The financial regulatory agenda discourages most non-insiders because of its apparent intractable complexity, enhanced by barriers of jargon and multiple smokescreens put up by financial executives wary of public discussion, and public authorities eager to protect their turf.
Take a step back, though, and there is no reason to despair. The past two years have brought significant achievements. In the United States, the Dodd-Frank Act introduced numerous changes that are far from marginal, and most of its implementing rules are in the process of being completed. In the European Union (EU), crisis resolution and financial legislation have been generally slower, but the creation of the three European Supervisory Authorities, in effect the world’s first supranational financial supervisors, is a major breakthrough. Capital requirements are being substantially increased, with the Swiss authorities taking particular leadership. Authorities are also improving their ability to understand and monitor financial systems, including through the collection of relevant data.