Trade-off between Soft Law versus Hard Law in Developing Jurisprudence of Prudential Global Financial Regulatory Framework 

Abstract

Global Financial Regulatory Framework (GFRF) existence as legal entities or informal association, may or may not be subject to a state enactment. Oftenly, this GFRF perform in a formal setup of professionals and representatives of various states without any compulsion of implementation resolution. Therefore, the GFRF set standards/guidelines are non-binding in the legal sense. Moreover, these standards scrutinize as a standard of an efficient financial sector and provide an incentive for compliance in the global financial regulatory framework. The validity of the global financial regulation is subject to the international legal norm where principles of legitimacy will always be challengeable in the jurisprudence of international financial soft law. The notion of a hard law as a World Financial Authority (WFA) replacing the international soft law regime looks unfeasible in the exiting framework. However, the World Financial Authority (WFA) can substantially influence sovereign supervision and regulatory decision in multi-jurisdiction, where the membership is universal across the globe regardless of size and economic contribution. The roadmap of implementing prudential GFRF is a tough task because each country differs accordance to its size, economic features, and priorities; it is difficult to impose straight-jacket prudential regulation formula without seeing their cross-country requirement. On the other side, the hard law, i.e., stick/sanction cannot guarantee to implement the prudential regulation. The same can be implemented through soft law, i.e., carrot/incentive, for example, in the framework of soft law mechanism, the adequate incentive can provide member jurisdictions to update and upgrade regulations in accordance with prudential GFRF. 

Keywords: Global Financial Regulatory Framework (GFRF), Jurisprudence, World Financial Authority (WFA), Hard Law, Soft Law