International standard-setting bodies, specifically the Basel Committee on Banking Supervision, the Financial Stability Board, the International Association of Insurance Supervisors, and the International Organization of Securities Commissions, play a critical role in the regulation of the global financial system. These bodies develop regulatory standards on issues ranging from capital requirements for banking institutions to the designation of global systemically important financial institutions.
U.S. regulators, including the Federal Reserve, U.S. Treasury, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, U.S. Securities and Exchange Commission, and U.S. Commodity Futures Trading Commission, are each members of at least one of these international standard-setting bodies and are expected to implement international standards through domestic regulation. The adequacy of the regulatory process used by the international standard-setting bodies is therefore of fundamental importance to domestic regulation, especially given the involvement of such bodies in critical aspects of the financial-market regulation after the 2007-2008 global financial crisis.
This Committee report, Enhancing the Regulatory Process for International Standard-Setting Bodies, analyzes three key attributes of the international standard setting process: (1) transparency; (2) public participation; and (3) cost-benefit analysis. Despite recent positive developments, the Committee finds there is a fundamental need and vast room for improvement in the existing international standard-setting process. Reforms to improve these processes will make the standard development process more robust, rigorous, rational, and legitimate. The Committee encourages international standard-setting bodies and U.S. regulators to adopt the policy proposals set forth in the report to enhance international standard-setting processes.
Read the Committee’s full report and recommendations here.