Introduction to Financial Services: International Regulation (CRS Report for Congress)
| Release Date |
Aug. 15, 2024 |
| Report Number |
IF12741 |
| Report Type |
In Focus |
| Authors |
Andrew P. Scott; Marc Labonte; Martin A. Weiss |
| Source Agency |
Congressional Research Service |
Summary:
While financial markets have become global, financial
regulation and supervision is conducted by domestic
agencies. Thus, domestic regulators take into account how
financial institutions and markets they regulate are affected
by international financial markets and foreign regulatory
frameworks. In the absence of an international financial
supervisor or regulator, countries negotiate voluntary
international financial standards and best practices that
domestic regulators may choose to implement.
The 2008 financial crisis underscored the
interconnectedness of the global financial system as well as
its weaknesses. After the crisis, international financial
stability became a policy priority that transcends national
boundaries—policies that lead to financial instability in one
country can cause it to spill over into other countries. Even
before the crisis, international standards were negotiated to
(1) avoid a “race to the bottom” to attract financial firms to
jurisdictions through lax regulatory standards and (2) to
coordinate regulation of financial firms with international
operations. Despite these efforts, substantial differences
exist among national regulations.
Congress grants U.S. financial regulators broad authorities
to regulate financial markets to achieve particular policy
objectives and has been interested in the extent to which
international fora influence domestic regulation. This In
Focus explains the general structure of the international
organizations that set financial regulatory standards.
