Regulatory Consolidation and Cross-Border Coordination: Challenging the Conventional Wisdom
Daniel Jacob Hemel
University of Chicago Law School
January 14, 2011
Yale Journal on Regulation, Vol. 28, No. 1, 2011
The conventional wisdom among scholars and policymakers holds that international regulatory coordination is more likely to arise when regulatory authority at the domestic level is consolidated within a single body rather than dispersed across an array of agencies. Many prominent participants in the ongoing debate over U.S. regulatory reform - including former Treasury Secretary Hank Paulson and former Federal Reserve Chairman Paul Volcker - have cited this supposed connection between domestic regulatory consolidation and cross-border coordination as a reason to reduce the number of U.S. agencies that share supervisory authority over the financial sector. Scholars, however, have not rigorously tested this hypothesis.
This Paper is a first step toward filling this gap. It examines how changes in U.S. domestic regulatory structures across the commercial banking, securities, and insurance sectors have shaped cross-border coordination over the last twenty-five years. These case studies suggest a surprising conclusion: contrary to the conventional wisdom, regulatory consolidation at the domestic level appears to be negatively correlated with cross-border coordination. When regulatory authority is fragmented among several agencies at the domestic level, U.S. financial regulators turn to their cross-border counterparts in order to circumvent roadblocks erected by domestic rivals. By contrast, in areas where a single regulatory agency enjoys consolidated control over a particular policy matter at the domestic level, that agency is less willing to restrict its policy-making discretion through an international agreement.
Number of Pages in PDF File: 39
Date posted: January 16, 2011 ; Last revised: December 20, 2015