The American Role in the Basel Committee on Banking Supervision: What Next?

Abstract

The United States has clearly benefited from its post-WWII role as the leader of the international financial system. As the international financial system evolves towards a more multi-polar global system, a continuing leadership role by the United States is critical to promote the free market, democratic model that has provided those benefits. This requires that the United States maintain a prominent position in the BCBS and in all other international standard setting bodies. On the one hand, the strength of the US financial system, in part, is tied to the capacity of the US regulators and policymakers to influence the decision-making process of these international fora to produce standards and policies that are consistent with US policies and the health of US financial institutions. On the other hand, the United States must navigate a changing environment in which its former dominance will be questioned and new players will become more important. This will require an understanding both of the importance of these institutions to the liberal economic order and to the United States interests and the skill to promote the United States in the changing environment.

The future will be created by the present, and the present depends on reliable leadership and engagement with the world. A vision of the national interest based on narrow transactional calculations could lead to an American abdication of its post-WWII role and the development of an international financial system that not only will fail to serve the world, but will impair the prosperity of the United States. The posture of the US Treasury to date gives cause for cautious optimism, but actions in other spheres give equal cause for concern.

Keywords: Regulation, International Finance, International Law, Basel Committee, US regulation