Global Financial Governance Research Articles

The Limits of Enforcement in Global Financial Governance: Blacklisting in FATF as Rational Myth

Abstract How might international institutions matter? To consider this central question of International Relations, we analyze a most-likely case for the importance of materially driven enforcement: the Financial Action Task Force’s (FATF) use of blacklisting in the global regime targeting money laundering and terrorism financing. Scholars and practitioners often argue that fear of financial harm caused by FATF’s lists explains the near-global commitment to FATF’s standards, even if compliance lags. We search for statistical evidence of this impact across four different measures of financial flows and find that listing is not correlated with financial harm. To explain these null results, we examine bank decision-making and find that the lists’ impact is likely diminished by two overlooked factors: the existence of multiple, competing lists and banks’ access to more fine-grained, client-specific information provided by third-party companies. We interpret this contradiction—a commitment to compliance generated in part by a fear of enforcement, despite a lack of evidence for enforcement’s impact—as a “rational myth.” The results challenge a common understanding of a major global governance regime, confirm ideas about the limited ability of states or International Organizations to control governance outcomes, and advance a new research agenda on the impact of bank decision-making on global governance.

The cross perspective of international economic law and international relations for global financial governance: SIEPUESM

The cross perspective of international economic law and international relations for global financial governance: SIEPUESM

International Experience and China's Approach to Financial Data Governance

With the rapid development of the financial industry and the improvement of information technology, data has become an important asset in the financial industry, and financial data governance has become an important issue in the industry. Financial data governance is necessary for ensuring data security, improving data value, promoting data circulation, and facilitating risk management. However, in practice, there is insufficient attention to the risks in the data governance process, resulting in many problems in the field of data governance. The author summarizes the dilemma of global financial data governance issues through literature analysis and case analysis, analyzes the successful experience of foreign financial data governance, draws on advanced governance models outside the region, combines with the actual situation in China, further localizes the practice, and proposes a governance path with Chinese characteristics, that is, to improve the existing legal system of financial data governance in China, improve the regulatory mechanism of multi-subject collaborative governance, actively promote the cross-border flow of financial data, and enhance the ability and standardization of financial data governance in China.

Interpellating Finance – a dramaturgical model for green bond pricing

Global financial governance is turning green. Attempting to tackle climate change, financial elites seem to swing confusingly between hesitant and action aimed at relieving the contradictions that led to the crisis, and opportunistic co-optation of critical discourse. Drawing on the work of Althusser, Laclau and Butler, we describe the historical emergence of this green financial apparatus and the related proliferation of green labels and signifiers. Green labels serve as the malleable ground on which a diversity of meanings and positions are articulated and temporarily fixed. Labels are the names through which financiers are interpellated and constituted as green ideological subjects. Through an analysis of the mechanisms of green bonds pricing, and of the actors involved in a green bond boot camp, we contend that the added value of green financial instruments, called the greenium, cannot merely be attributed to the performativity of models and formulas for risk engineering. Rather, it is the material effect of a subjectivation apparatus attuned to the existing relations of production. Ultimately, the greenness which becomes encrypted in the greenium is a process of translation of language of capital valorisation, performed through the tendency of capital to reproduce relations of exploitation in transitional time.

Factions and agenda-setting in the G20 (2008-2019): Assessing Pre-Pandemic Dynamics

Based on previous studies that have identified an over-representation of the interests of G7 countries in the functioning of the G20 (Benson & Zürn, 2019; Lei & Rui, 2016; Prodi, 2016), this article aims to identify the factors that contribute to the imbalance of the agendas or proposals that have characterised the forum’s work. Four factors that could influence the phenomenon under study are analysed theoretically: the degree of globalisation of the countries participating in the G20, their political regimes, the stability of their institutional systems, and the levels of development of their respective economies. With the use of a mixed methodology based on a multinomial logistic regression model and in-depth interviews, attention focusses on how the factors identified contribute to the imbalance observed in the forum. The results show that there are factions within the G20 that effectively congregate around the forum's agenda; those states dominating this exercise of political power have similar political regimes and economic development models, as well as internal structures more open to globalisation. This study provides a possible explanation of how imbalance in agenda-setting occurs in an international forum. In turn, it shows how the homogeneity of the members favours their role in establishing the framework for global economic and financial governance.

Perceptions, Promotion and Pre-eminence: India’s Presidency of the G20

New Delhi’s taking on the G20 Presidency represents a highly important—if not watershed—moment for Indian diplomacy. For an India that is transitioning from being a developing to a developed economy and whose great power rise centres upon core goals relating to development, modernisation, status, leadership, importance, prestige and pride, assuming the G20 Presidency seems transformational. A central part of the G20’s remit also concerns constructing and maintaining global financial architectures and governance mechanisms, which India can now crucially influence as her own economic clout increases on the global stage. Moreover, New Delhi’s Presidency signifies a pivotal time for the legitimacy of the G20 and one which potentially heralds a more representative era for the grouping, which will only enhance India’s global pre-eminence.

Economics for an uncertain world

Uncertainty, where we do not know the likelihood of future events, dominates our world. This article examines how economics as a profession and discipline can address uncertainty. From Frank Knight to John Maynard Keynes to Friedrich von Hayek to George Shackle, economics has highlighted the importance of uncertain knowledge and distinguished this from calculable risk. In this article we show how such insights were lost through the rise of narrow neoclassical thinking and were excluded through the emergence of a dominant economics of control that rose to prominence during the twentieth century and especially in the neoliberal era. However, through a range of perspectives in economics that emphasise the importance of complexity, informality, positionality and narratives, uncertainty is once again being embraced within an increasingly heterodox economics. In many ways, this chimes with the work of Albert Hirschman who, starting from the mid-1960s, emphasised the importance of addressing uncertainty in development theory and practice. Through two examples on pastoral development and global financial governance, we highlight the continued relevance of Hirschman’s thinking on the importance of adaptation, flexibility and learning-by-doing as responses to uncertainty and for the development of reliable, robust approaches to development policy and practice. In conclusion, we argue that economics theory, methodologies, professional practice and training need to change, recovering some of the insights from previous generations of economic thinkers and practitioners, in order to reinvent an economics appropriate for our uncertain world.

Global financial governance: Need for a new approach

Global financial governance: Need for a new approach

Global financial integration, governance-by-technology, and green growth

This study determines the influence of governance-by-technology (including the e-governance index and governance index) and socio-cultural factors (including sociocultural integration and household consumption per-capita) on inclusive green growth (IGG) with the moderating effect of global financial integration. Government expenditures and poverty were used as control variables. This study used the data of 64 Belt and Road initiative (BRI) partner countries from 2005 to 2020, which was analysed using the two-step system GMM (the generalized method of moments). The results was analysed using the two-step system GMM (the generalized method of moments) and validated through the D-K regression, 2SLS and dynamic fixed-effect robustness methods. Outcomes indicated that global financial integration positively moderates the relationship between governance-by-technology and IGG. Therefore, it can be stated that global financial integration, e-governance index, governance index, and sociocultural integration endorse IGG. The findings of this study contribute to the existing literature by providing new insights into inclusive green development, governance, technology, and socio-cultural integration. This study also encourages policymakers and institutions to focus on governance, e-governance, socio-cultural factors, and financial integration to boost inclusive green growth in the BRI region.

The War in Ukraine and the End of the American Financial Order?

The crises of 1997–98, 2008, and the pandemic accelerated contradictory changes in global financial governance. Taken together, the change and stasis propelled by these crises is coalescing around a fragmented “post-American financial order.” The war in Ukraine represents another inflection point. The war has facilitated the reassertion of American financial power and cooperation among rich nations. However, like previous crises, the war is creating fissures in financial governance. The landscape offers risks and opportunities against a backdrop of heightened financial fragilities, authoritarianism and fascism, inequalities, devastation associated with the pandemic and war, and climate crisis. In such moments, Hirschman’s “possibilism” is both elusive and necessary. In this context, we might aspire to “permissive multilateralism s” rather than nostalgia for a new Bretton Woods. JEL Classification: F02, F51

The role of China in the international financial system

AbstractChina’s interaction with the international financial system is driven by its growing economic importance in the world. However, China’s financial influence has been much under-presented compared with its economic power. This mismatch provides an opportunity for China to promote greater inclusiveness and better balance of power in global financial governance. The accelerated financial opening-up, exchange-rate flexibility, and deepened domestic reform also nourished the ambition of internationalization of the renminbi that would have impact on the global reserve currency system. This paper investigates the motivations behind China’s engagements with the international financial system, the approaches China adopted to achieve its goals, and the key domestic policies required for China to gain more weight in the global financial market.

Regionalism, Multilateralism, and Sovereign Debt: Observations from a Latin Americanist

The paper posits a powerful mutuality of interests between global multilateralism and independent regionalism in the global South. The more-or-less liberal international order established following the Second World War struggles to retain political and financial support from advanced industrial countries. Since the underlying source of this tension reflects a structural shift in the interstate distribution of power capabilities toward rising global multipolarity, the only viable medium-term solution for peak multilateralism is achieving greater legitimacy among a wider field of countries. Greater innovativeness is a second benefit to central multilateralism of expanded regional access: important international policy challenges are not “seen” until those who experience them have sufficient voice. The counterpart challenge within the global South is the frustration of policy entrepreneurs from small and intermediate powers. Most recognize the need for prior interest-aggregation to exercise influence in peak international organizations where great powers dominate. However, effective regionalism, a perennial and obvious choice for non-great powers, in practice has been difficult, especially in Latin America. Yes, one explanation is vicious partisan squabbling in the neighborhood, but subtle, structural factors also undermine cooperation, as a quick comparison with Europe demonstrates. In this context, “regionalism” is best conceptualized as a mix of formal organizations and regionally-based transnational epistemic communities or activist networks. A case study of Latin America-focused policy entrepreneurship over several decades around the global financial governance of currency and sovereign debt illustrates these observations.

Imaginary failure: RegTech in finance

ABSTRACT The notion of ‘RegTech’ has become a buzzword for applications of emergent technologies to regulatory activities. This paper contextualises and interrogates the novelty of the RegTech phenomenon as expounded in recent years by industry practitioners, regulators and a growing chorus of scholars. Harnessing the notion of ‘imaginary’ from Science and Technology Studies, we identify a particular solutionist vision materialising across public documents from national and international financial regulators, industry organisations, as well as RegTech and consulting firms. We identify two failures of an emerging RegTech imaginary. First, is a dynamism failure in the way RegTech materialises static visions of regulation. Second, is a systems failure as the solutionist RegTech imaginary focuses on narrower, individual problems in finance at the expense of wider changes occurring since the 2007–8 global financial crisis. RegTech, we conclude, reflects continuities with a pre-crisis era and fails to tackle key market and regulatory changes occurring since. Our analysis holds implications for the turn to technological solutions in addressing persistent issues of instability in global financial governance. We point to the need for developing wider imaginaries of technological possibilities for regulation in an increasingly digital world.

Global Financial Governance and Progressive Feminist Agendas

Feminists and other progressives have long argued that global macroeconomic governance is deeply deficient. The deficiencies have been revealed and amplified by the COVID-19 crisis. The need to radically reconstruct the global economic governance architecture is therefore pressing. Albert Hirschman’s conception of “possibilism” is particularly relevant for navigating these challenges. In the spirit of Hirschmanian possibilism, I make a case for what I refer to as “enabling global financial governance.” I use this term to refer to reforms of global financial governance that could provide a supporting environment for feminist and other progressive plans for sustainability and social justice. I advance the provocative claim that feminists and other social justice advocates should embrace what I term “permissive multilateralisms” rather than “harmonized multilateralism.” I also highlight a number of directions for global financial governance reform that could provide policy space for progressive initiatives, including those advanced by feminists. I offer this paper as a small way of honoring my friend, Eugenia Correa, whose intellectual legacy and commitment to engaged scholarship has influenced me profoundly.

The interrelationships between bank risk and charter value in ASIAN-5

ABSTRACT This study examines the interrelationships between bank risk and charter value in five countries in Southeast Asia (ASEAN-5) from 2006 to 2019 using a simultaneous equations model. The findings show a two-way relationship between bank risk and charter value. More specifically, the positive relationship between charter value and bank risk implies that banks with a more excellent charter value tend to pursue fast growth strategies and thus may face a higher risk. This positive link, however, only holds up to a certain level of charter value. On the other hand, the negative impact of bank risk on charter value argues that more risky banks tend to generate lower returns, thus reducing charter value. Additionally, a bidirectional relationship between them still holds when using an alternative measure of bank risk and controlling for the global financial crisis and governance indicators. Therefore, our findings provide critical implications for policymakers, managers, and academics.

The interrelationships between bank risk and market discipline in Southeast Asia

PurposeThe purpose of this study is to examine whether a bidirectional relationship between bank risk and market discipline may exist in Southeast Asia.Design/methodology/approachA simultaneous equations model with a three-stage least squares estimator is used to examine the interrelationships between bank risk and market discipline using a sample of 79 listed banks in five countries in Southeast Asia (ASEAN-5) from 2006 to 2019.FindingsThe findings show a two-way relationship between bank risk and market discipline. In particular, market discipline has a negative impact on bank risk, while there is a positive relationship between bank risk and market discipline. A bidirectional relationship between them still holds when using an alternative measure of bank risk in subsamples, controlling for the global financial crisis and governance indicators.Practical implicationsThe findings indicate that market discipline can reduce bank risk. Meanwhile, a positive impact of bank risk on market discipline reemphasizes that market discipline is a powerful tool to ensure banks do not have excessive risk-taking. Nonetheless, the findings suggest that further implementation of market discipline as the third pillar of the Basel framework is necessary for the banking systems in ASEAN-5.Originality/valueTo the best of the authors’ knowledge, this study is the first attempt to investigate the interrelationship between bank risk and market discipline in Southeast Asia.

Who Is Credible? Government Popularity and the Catalytic Effect of IMF Lending

In this paper, I explain variations in international investors’ reactions to International Monetary Fund (IMF) programs. Investors react favorably if a borrowing government is credibly committed to implementing essential IMF conditionality. Instead of engaging complex information processing about economic reform, however, investors rely on a heuristic device to assess the borrower’s domestic political conditions. I argue that a borrowing government’s popularity is an important cue for investors to assess the prospect of an IMF program. Investors associate higher government popularity with better implementation of the program and react more favorably to more popular borrowers. Using annual data from up to 52 emerging market economies from 1998 to 2017, I find robust statistical evidence supporting these claims: an IMF program alone does not restore investor confidence. Rather, an IMF program carried out by a strong government does. My findings have important implications for the study of global financial governance and credible commitment.

Power Contention and International Insecurity: A Thucydides Trap in China–US Financial Relations?

ABSTRACT The China–US financial contention or confrontation comes to the fore, given the pivotal role of finance in the international system and the current international order transition. Will there be destructive conflicts or a Thucydides Trap in China–US financial relations? By adopting a power analysis framework, the China–US financial contention is observed from four types of international financial power: structural, relational, institutional and ideational. The competition for these powers results in reform divergence of global financial governance and thus international financial insecurity. The contention and consequent insecurity, however, do not necessarily mean an inevitable ‘Thucydides Trap’ in China–US financial relations. Elaborated and issue-specific ways of management could alleviate the contention, including shunning RMB-USD strategic confrontation, refraining from a debt weapon and aggressive imbalance adjustment, enhancing the legitimacy of international financial institutions and avoiding a new Cold War.

Global Financial Governance—need for a new approach-A commentary

Global Financial Governance—need for a new approach-A commentary

Institutionalization of the BRICS discourse: How does the NDB embody the group’s views on global financial governance?

The architecture of global financial governance has recently been complemented by emerging economies’ efforts to coordinate policies, as exemplified by new coalitions of states and a new set of non-Western international institutions. BRICS, in its turn, has made a significant contribution in this direction by establishing the New Development Bank — an alternative to traditional mechanisms of financing development projects with an emphasis on sustainability. As a representative of the growing cooperation of the BRICS countries in recent decades, the NDB highlights most of the group’s views on financial governance. This paper applies a qualitative/analytical approach to the BRICS and NDB Communiqués and practices in order to demonstrate how the bank has managed to successfully institutionalize the group’s discourse over time.