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The Dangerous Illusion of International Financial Standards and the Legacy of the Financial Stability Forum


Cally Jordan


Melbourne Law School; Centre for International Finance and Regulation (CIFR); European Corporate Governance Institute (ECGI); Center for Transnational Legal Studies (London)

September 16, 2010

San Diego International Law Journal, Forthcoming
U of Melbourne Legal Studies Research Paper No. 508

Abstract:     
In the aftermath of the Asian Financial Crisis, and the criticism directed towards the International Monetary Fund, in particular, for not having seen it coming, the Financial Stability Forum (FSF) was created in 1999 under a mandate from the G7 ministers of finance and central bank governors. The Asian Financial Crisis arose suddenly, spread rapidly and spared neither developed nor developing economies in the region, although some fared much better than others. In retrospect, the causes of the crisis were obvious and the consequences predictable. “Contagion” entered the financial lexicon.

Thus the role of the FSF was to promote financial stability across national borders and provide an early warning system, identifying potential weaknesses or “vulnerabilities” in national financial systems, with a view to preventing a repetition of the localized financial chaos of 1997. The development of international standards for financial and other commercial regulation and the implementation of the Financial Sector Assessment Program or “FSAP” (designed to monitor and assess financial stability on a country by country basis) were two of the initiatives associated with the FSF.

The Asian Financial Crisis, however, was just a tremor compared to the earthquake of the current Global Financial Crisis (GFC) which has shaken financial markets around the world less than a decade after the establishment of the FSF.

That the FSF was a failure is patently obvious. It has been relegated to the dustbin of history with little ado. This paper will endeavour to identify some of the reasons for the failure of the FSF, with a particular focus on international standard setting and financial sector assessment initiatives, with a view to assessing the prospects of the reincarnation of the FSF, the new Financial Stability Board (FSB).

Number of Pages in PDF File: 36

Keywords: financial stability forum, global financial crisis, international financial standards, IOSCO, FSAP

JEL Classification: F00, F02, F30, F36, G15, G18, G28, K20, K22

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Date posted: September 18, 2010 ; Last revised: November 15, 2010

Suggested Citation

Jordan, Cally, The Dangerous Illusion of International Financial Standards and the Legacy of the Financial Stability Forum (September 16, 2010). San Diego International Law Journal, Forthcoming; U of Melbourne Legal Studies Research Paper No. 508. Available at SSRN: http://ssrn.com/abstract=1678054

Contact Information

Cally E. Jordan (Contact Author)
Melbourne Law School ( email )
Victoria, 3010
Australia
Centre for International Finance and Regulation (CIFR) ( email )
Level 7, UNSW CBD Campus
1 O'Connell Street
Sydney, NSW 2000
Australia

European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
Center for Transnational Legal Studies (London) ( email )
37-39 High Holborn St
Swan House
London, WC1V 6AA
United Kingdom
44 0203 077 5900 (Phone)
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