International Financial Regulation : The Quiet Revolution

The author points out that the general directions of change adopted by the financial authorities in countries around the world in response to the market turbulence of 1997 and 1998 are correct. But, even as recovery gathers pace and so one impetus to reform weakens, reforms need to be pursued with more vigour than has been the case hitherto. It points to three areas where further change is certainly needed: First, the international financial architecture, where important reforms have been made, but where the hard work of implementation still lies ahead; second, in international financial regulation, where there is more work to do to ensure that the right incentives are in place for financial institutions in developed and developing markets to manage their risks more effectively in future; and third, in emerging market countries themselves, where there is a need for more practical efforts to upgrade accounting and legal standards, and systems of financial regulation, and of course to clean up the balance sheets of banking systems which, in many cases, remain very fragile. [C D Deshmukh Memorial Lecture]