ABSTRACT
The international finance system has no enforcement mechanism analogous to the state’s authority in national financial systems, even as international financial flows have grown to dwarf international real-economy flows. It lacks institutions and organizations that are normal at the national level, such as a central bank, a financial regulator, a bankruptcy court, deposit insurance, and the like. Yet the financial services industry is built on confidence, and lack of confidence in international transactions can be extremely contagious. Hence the desirability of international institutions to provide the international public good of confidence in the international financial system. That means prudential rules, such that all international banks reach an acceptable standard of prudence, and transparency rules, such that all governments, banks and other financial organizations reach an acceptable standard of transparency in their financial accounts.
