As the United States and other countries around the world embark on properly regulating the financial services sector in hopes of preventing future financial collapse, House Financial Services Chairman Barney Frank warns that an international "race to the bottom" could undermine these efforts.
Congress Daily reported last week:
Frank said that there is wide agreement among the European Union, Canada, France and others that there must not be an "escape hatch" as countries revamp their systems to make their rules sufficiently similar to others.
"Everyone understands that it would be fatal," Frank said. "There is just overwhelming agreement that this is going to be done in a multinational, coordinated way and that a great conglomeration is going to come down hard on anybody that tries to play games with it."
While Frank deserves praise for pledging to prevent the woefully low regulatory floor that would be created should some countries fail to implement stricter regulations on financial services, policymakers also need to be careful about the regulatory ceiling that could be imposed by the World Trade Organization (WTO) and other international trade agreements.
Americans for Financial Reform lays out a set of guiding principles for re-regulating financial services in the global arena which will help ensure that policymakers and regulators have the policy space to get it right.