WORLD GLOBALIZATION OF THE BANKING & REGULATORY STRUCTURE

http://www.newswithviews.com/Veon/joan165.htm

WORLD GLOBALIZATION OF THE BANKING & REGULATORY STRUCTURE
PART 1 0f 2

By Joan Veon
June 29, 2009
NewsWithViews.com

BASEL, SWITZERLAND - The power base of the world has shifted...it is no
longer in London, New York City, Washington D. C., or Tokyo. Neither is
it in Beijing or Moscow. It is Basel, Switzerland. In 1930, the Bank for
International Settlements-BIS was set up as a result of the Young Plan
which was named after the man who presided over the Allied Reparation
Committee, Owen D Young.

Basel was chosen as its location because everyone could get on a train
from anywhere in Europe to attend its meetings. When you walk out of the
main train station, the BIS is within easy walking distance of one
block. A modern 18 story high building belies the power it extends
globally. There is nothing about the building that calls anyone's
attention to it other than the plaque near the glass front doors that
basically says it is private property. The world's power brokers walk to
the BIS without fanfare and are set apart from the citizenry by their
business suit and ID pass.

Yet within its walls the world's monetary system is being designing and
directed by many illuminated and brilliant people from inside and from
without, those who visit regularly from all over the world include:
central bank ministers, treasury secretaries, regulators, insurance
supervisors, deposit insurers and accountants. Truly the BIS is all
powerful. Dr. Carroll Quigley in his book, Tragedy and Hope, wrote that,

The powers of financial capitalism had another far reaching aim, nothing
less than to create a world system of financial control in private hands
able to dominate the political system of each country and the economy of
the world as a whole. This system was to be controlled in a feudalistic
fashion by the central banks of the world acting in concert, by secret
agreement, arrived at in frequent meetings and conferences. The apex was
to be the Bank for International Settlements in Basel, Switzerland (pp.
324-25).

If this power was not evident before, it is in the process of becoming
greater and more immense. While the BIS has always been the focal point
of central bank activity globally, it now is finalizing the structure
Dr. Quigley wrote about. Bi-monthly, the Group of Ten central bankers,
along with those from majoring developing nations come together to
discuss global monetary policy, among other things. Over the years it
has expanded to the point that every aspect of banking, finance,
insurance, deposit insurance, and regulation now constitute its core
workings.

In the mid-1990s the word "globalization" came into our vocabularies as
we were faced with naming the process whereby the barriers between the
countries of the world started to fall. Beginning with the establishment
of the International Monetary Fund and World Bank in 1944, the financial
barriers between countries fell; with the establishment of the United
Nations in 1945, the political barriers fell; with the establishment of
the World Trade Organization in 1994, the trade barriers fell; with the
establishment of the International Criminal Court in 1998, the legal
barriers fell; and with the September 11, 2001 attack on the World Trade
Center, the military and intelligence barriers fell.

Similarly, during the 1990s, the Bank for International Settlements
started to set up its own level of globalization. In1998, the
International Association of Insurance Supervisors was set up and is
comprised of insurance supervisors from all over the world. In 1999, the
Financial Stability Forum was set up which was comprised of the Group of
Seven treasury secretaries, central bankers, and regulatory agencies.
Recently this organization was expanded to include the Group of Twenty.
Then in 2002 the International Association of Deposit Insurers was set
up. This organization is comprised of the "FDICs" of the world. Another
organization which was set up in 1973 and then reconfigured in 1984 is
the International Organization of Security Commissions-IOSCO which is
basically a global "security and exchange" commission which has
facilitated a global stock exchange.

What the 2008 Credit Crisis has provided is an opportunity to further
enhance and empower these organizations which will and are in the
process of transferring respective responsibilities from the national
level to the global level, thus completing the process of banking,
insurance, auditing, accounting, and regulatory globalization. It should
be mentioned that in order for the United States to play its role in
this process, the Obama Administration will have to set up a single
national regulator over our seven different regulators that currently
work independently. This is so important a step that the Financial Times
recently ran an editorial on June 20 that warned America,

The need for thorough regulatory reform is still pressing. One concern
stands out: the risk of the whole financial system breaking down, as it
did last autumn. Those who want to give central banks the power and
responsibility to monitor systemic risks are right. They include the US
Treasury, whose proposals this week seek to turn the Federal Reserve
into a systemic super-regulator. These proposals are contested. They
should not be; the alternatives are worse. Reforms to rein in systemic
risk must not now fall prey to politics. They must be enacted before the
memory of last autumn fades.

Let us examine what the first paragraph of the Bank for International
Settlements 79th Annual Report stated with regard to the credit crisis:

How could this happen? No one thought that the financial system could
collapse. Sufficient safeguards were in place. There was a safety net:
central banks that would lend when needed, deposit insurance and
investor protections that freed individuals from worrying about the
security of their wealth, regulators and supervisors to watch over
individual institutions and keep managers and owners from taking on too
much risk. Since August 2007, the financial system has experienced a
sequence of critical failures.

While it provides their assessment of what went wrong, the report
summarizes the problem and the solution this way:

In summary, financial regulators, fiscal authorities, and central
bankers face enormous risks. Building a perfect, fail-safe financial
system-one capable of maintaining its normal state of operations in the
event of a failure-is impossible. Standing in the way are both
innovation and the limits of human understanding, especially regarding
the complexity of the decentralized financial world. We have no choice
but to take up the challenge of first repairing and then reforming the
international financial system.

Their recommendations include the BIS standard-setting committees (the
Basel Committee on Banking Supervision, the Central Bank Governance
Forum, the Committee on Payment and Settlement Systems, and the Markets
Committee) and the Financial Stability Board. For our purposes we will
discuss the newly centralized power of the Financial Stability Board.

First it should be noted that with this kind of total economic and
monetary failure, the entire system should be scrapped and perhaps we
should go back to being individual nation-states, but you see for their
purposes, they are expanding and empowering another level of control
which will move the assets of the entire world into their domain. No
physical war, no guns, no bullets-electronic financial warfare.

The Financial Stability Board was originally the Financial Stability
Forum-FSF. When it was set up in 1999, I interviewed its
Secretary-General, Svein Andresen who told me that there was no
guarantee that it would be able to protect the global system from
problems. However, it was believed that if you brought the central bank
ministers together with the treasury secretaries and the regulatory
agencies from the Group of Seven countries that it would provide a
framework to protect the global financial system. Obviously they failed
in their mission. The alternative instead of liquidating the FSF was to
expand and empower it. When I asked FSB Chairman Mario Draghi about the
role and input of the international bankers like Sir Evelyn de
Rothschild, he replied,

We are in contact with various --say bankers association, market
association-banks, hedge funds, securities fora and lots of other
bodies. We look at what they do and then we make up our own mind. So it
is an interesting context but in the end, ours is a forum where you have
the regulators-banking regulators, market regulators, financial
ministries and international organization and institutions and standard
setters. So it is our own mind in the end which we look at.

It is important to note that the internationalization or globalization
of the financial system is here. It constitutes tearing down the final
barrier between the countries of the world. It has been almost fully
operational for at least 10 years. At this point in the game, the
integration between a handful of international organizations is
apparent.

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The need to coordinate international accounting through the
International Accounting Standards Board with the American counterpart,
Financial Accounting Standards Board- FASB with the FSB and G20 is
already happening. IOSCO is working with the BIS Joint Forum and FSB. In
order to develop high quality international standards for auditing,
assurance, ethics and education for professional accountants, the
Monitoring Group was set up and a Charter was put in place in 2008 by
Memorandum of Understanding. Those participating include: IOSCO, the
Basel Committee of Banking Supervision, the European Commission, the
International Association of Insurance Supervisors, the World Bank, the
Financial Stability Board and the International Forum of Independent
Audit Regulators.

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There are so many working groups which now comprise a new level of
regulatory oversight operating internationally that it is almost
impossible to go back to the power of the individual nation-state. The
number and the oversight of these groups will make your head spin. Can
we go back? Any country who would dare say no would be completely
destroyed-ask the 5 Asian countries that chose to say no to the WTO
Financial Services Agreement in the mid-1990s. It is now the Financial
Stability Board which is now empowered with becoming the "United Nations
of Financial and Regulatory Control" over countries. For part two click
below.

Click here for part ----- > 2
<http://www.newswithviews.com/Veon/joan166.htm> .

(c) 2009 Joan Veon - All Rights Reserved

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