ABSTRACT
Recent developments in liberalisation and innovation have altered the operation of financial markets and consequently, fundamentally changed global financial governance, notably by posing significant constraints on the traditionally public functions of regulation and supervision. State actors are no longer capable of adequately guiding and overseeing financial activities that transcend national regulatory and legal boundaries. At the same time, they appear unwilling to reverse this pattern, for fear of harming their competitiveness.1 Transnationalisation and financial complexity have not, however, relieved pubic authorities of their regulatory and supervisory responsibilities. Instead, the challenge is to promote market efficiency and stability while sharing authority with a growing number of actors, including the private sector. The focus has shifted from regulation to supervision, and much of the emphasis is placed on systemic stability, i.e. the prevention of crises. This has left financial institutions in charge of making their own rules, or rather creating their own flexible standards, and public authorities in charge of market-based supervision, increasingly reliant on private sector know-how and transparent practices.
