A Global Solution for Cross Border Financial Resolutions

 

The risk to small countries who host financial centres, such as Ireland, Luxembourg, and many of the British offshore centres and Crown dependencies such as the Channel islands is currently in vogue, as it is with regulators in larger centres, as evidenced by a report just published by the Institute for International Finance, which puts the issue at the very top of their agenda.

With regulation officially at the top of the agenda at the Toronto G20 summit, the issue also should bear attention there.

Peter J. Wallison believes he has a fix, and in an interview with the editor of Financial Centres International, he sets out his solution, an idea that, had it existed when Lehmans failed, would have saved a lot of bother, and would eliminate a major part of the transnational risk that regulators now worry about, and which threaten the globalisation of finance, and even raise the spectre of a return to the financial autarky (that Keynes, among others, contemplated in the 1930s).

The problem is that bankruptcy systems are territorial and national, given the traditional jurisdiction of bankruptcy courts. When banks are in difficulties, it becomes reminiscent of the desparate observation of the Icelandic Prime Minister memorably on the night of Iceland's demise, "it's every man for himself".

To counter this, Wallison proposes what he calls a "debtor selection system". It has the merit of simplicity, and workability. Once established, by an internaitonal protocol, he believes, financial centres around the world would feel compelled to comply, and a domino effect across international boundaries and regions of all kinds could see the system established. . . .

The full text of this interview is available as an Adobe Acrobat PDF.

Peter J. Wallison is the Arthur F. Burns Fellow in Financial Policy Studies at AEI.

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Peter J.
Wallison

What's new on AEI

image The Census Bureau and Obamacare: Dumb decision? Yes. Conspiracy? No.
image A 'three-state solution' for Middle East peace
image Give the CBO long-range tools
image The coming collapse of India's communists
AEI on Facebook
Events Calendar
  • 14
    MON
  • 15
    TUE
  • 16
    WED
  • 17
    THU
  • 18
    FRI
Wednesday, April 16, 2014 | 10:00 a.m. – 11:00 a.m.
Calling treason by its name: A conversation with Liam Fox

Join us at AEI as the Right Honorable Liam Fox sits down with Marc Thiessen to discuss and debate whether America’s intelligence agencies have infringed on the personal privacy of US citizens.

Thursday, April 17, 2014 | 4:00 p.m. – 5:00 p.m.
The curmudgeon's guide to getting ahead

How can young people succeed in workplaces dominated by curmudgeons who are judging their every move? At this AEI book event, bestselling author and social scientist Charles Murray will offer indispensable advice for navigating the workplace, getting ahead, and living a fulfilling life.

Event Registration is Closed
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.