IFI governance

Background

Global financial regulations and their Impact on major campaigns

11 October 2012 | Minutes

Sponsor: New Rules for Global Finance Coalition

This event was a collegial information-sharing and strategy session to explore the linkages between financial regulations and grass roots campaigns.

Facilitators: Eric LeCompte (Jubilee Network USA), Jo Marie Griesgraber (New Rules)

Jo-Marie Griesgraber, New Rules

Today is a conversation regarding the FSB, to understand it and so we will conduct a workshop. This is for working

My name is Jo-Marie Griesgraber – DC, New Rules new-rules.org, and FSBwatch.org

We have been working for years on the IMF and increasingly on the G20 and all of that, and through the G20 what used to be called the FSF of just FinMins was transmogrified into the FSB by the G20.

It is comprised of the regulators, financial regulators from the top 25 states, if you’re a big country you have 3 representatives, the US has theTreasury, Central Bank  (Fed) and the SEC (securities exchange commission). A small country like Argentina gets 1 representative.

When they meet twice a year, not on a scheduled basis, it is called the plenary, and they approve the work done beforehand outside the plenary forum. Decisions are made by consensus otherwise you must make a strong objection.

Implementation of these global regulations are applied to all governments. In addition there are standard setting bodies (SSBs) just as the Basel Committee on Banking, setting regulations, to the IASB (made up of 100% private bodies) including private, non-private, and all in between.

There is no basis, though the FSB charter originally said there would be oversight until the revised charter revoked it. The FSB allegedly carries out the work charged by the G20, but they also say they are accountable to the states though they are a creation of the G20.

The purpose here is to understand the FSB. Apart from their concluding documents, nothing else is available on the website. They now have regional consultative groups, where 1 member of the G25 is the co-chair, and another co-chair from the non members, and they invite some member states say form SSA, or from the western hemisphere, or from Europe and from Asia.

In Tunis, the Central Bank thought they were a member, and they’re listed as a member, but the attendee said ‘we’re only an observer’. We don’t know minutes, we don’t know how or to whom they report. This afternoon there is a press conference – which is closed. Can the press get in?

It is the most closed organization that we can find – that used to be the IMF, which is easy to work on by comparison. We want to show the link of what the body does, it is based in Basel . We have identified key issues.

      1. Governance

 

      2. Issues they do not work on: e.g. sovereign debt, international tax policy, (they do work on derivatives, use of derivatives – so all campaigns on food security need to look at the FSB)

 

      3. They do look at trade in financial services, e.g. when banks move into a country and have freedom – this is to do with the WTTO standards on trade in financial services

 

    4. Banking regulation – including how banks go broke

Eric will talk about one of those campaigns and its link to one of those policies.

Eric LeComte – Jubilee USA network

Two years ago we knew very little about this, and thanks to Jo-Marie we know that if we care about what the IMF, G20, debt resolution iessues etc are important.

Specifically we have raised more concerns about what is happening in the shadows, with this institution.

The primary issue we work on that relates to this is the international sovereign debt crisis.

One of the things that we’ve worked on is a global campaign and understanding the role of the FSB, and the type of linkages it is seemingly supposed to have. This is a place where it’s possible to further discuss and push for a fair arbitration process or sovereign debt workout mechanism – such as our event later today goes into in further detail. Specifically what the FSB could be looking at with such a process is to consider

The sheer complication of debt workout, given the number of involved actors, and it’s more than simply international financial institutions such as the IMF and World Bank. The FSB is ostensibly an umbrella for a number of these institutions. Therefore looking for an open and transparent process for a sovereign debt workout mechanisms

We believe it needs to include all those creditors, and conduct impartial assessments of claims and validity – legitimacy and illegitimacy of that debt and even sustainability. Finally how to work toward eventual debt cancellation.

Once essentially a claim is field or once something is brought to the debt workout process, a moratorium occurs so that there is space to work out a debt process.

This is something that many of us believe is truly transformative – looking at broader lines of accountability.

When we have a higher level of responsibility of lending and borrowing, it’s more than just lending and borrowing – it’s a question of developing accountability for lenders and borrowers.

Whatever the responses to this, when a fair and transparent process works it is able to assign responsibility for what is a good loan and what is a bad loan.

We also have to note that in the North that this would be an improvement on how debt is being handled in Greece and Ireland as two examples –

Relating to the FSB’s responsibilities, in terms of tax issues I think it is a pretty important point, especially from a development perspective. More than $ 3trillion dollars has left the developing world in the last decade, principally via banks, untaxed. In much of the global south – note that even a modest tax on these flows would hugely overwhelm the scale o f the debt crisis.

Thus there is potential for truly transformative change, and if the FSB is not going to ask that we really must ask what is it for.

One piece of intelligence I’d like to share, a few weeks ago we met some high level Obama staff that were looking at financial issues and debt issues and they made a remark which I am still not sure is totally accurate.

They said if you look at the FSB, the G20 etc it is a good time to put these issues on their plate because essentially they right now have no agenda in terms of what they are trying to achieve globally. With other international governance systems coming on the scene, the G8 and G20 are having a bit of an identity crisis in terms of what they’re for, and so we’re here to help.

Jo-Marie – So lets open to discussion – please introduce yourselves. I see Gail Hurley in the room who works with UNDP