Calls for a more coordinated system of international financial regulation have been growing as the Occupy Wall Street protests in New York inspire similar demonstrations around the world.
Since activists in September began the Occupy Wall Street movement in New York's financial district, protesters have been calling attention to unfulfilled promises for tighter regulation of the financial institutions that they blame for the global economic crisis.
Indeed, many reforms pledged by politicians as the global economic crisis unfolded in 2008 have been blocked or delayed -- leaving only modest changes to the way the world's financial system is regulated.
Frustration with the authorities dragging their heels on reform has now made itself felt on the streets of New York and other U.S. cities.
"It's clear that people feel like the politicians have not been prioritizing the needs of working people," says Mark Bray, a spokesman for the Occupy Wall Street protest movement.
"Even if the political parties change, when the economic crash occurred and the Wall Street bankers speculated and gambled away people's lives, nevertheless, working people are the ones who suffer and the financial institutions are the ones that continue with business as usual."
Giving Voice To Frustrations
U.S. President Barack Obama recently claimed the Occupy Wall Street movement gave voice to broader frustrations about how financial sector lobbyists work to prevent more stringent regulation, despite the fact that the United States has just endured "the biggest financial crisis since the Great Depression."
"And yet you're still seeing some of the same folks who acted irresponsibly trying to fight efforts to crack down on abusive practices that got us into this problem in the first place," the president said.
On a global level, critics argue that international regulators have failed to keep pace with the globalization of financial markets. But calls for stronger global regulation raise the question of who should serve as the police and courts for international financial markets.
Masked protesters warm themselves at a fire after setting up camp in front of the European Central Bank in Frankfurt.
Many economists say the problem is not a lack of global institutions. Rather, they argue, there is neither a hierarchy between existing regulators nor a central power that has the authority to force urgent action.
In other words, when it comes to regulating global financial markets, no one is really in charge of anyone else -- not in the way, for example, that the World Trade Organization has the authority to regulate and enforce international law in trade disputes.
Indeed, the International Monetary Fund and the World Bank have oversight roles that allow them to monitor international finance. But neither is a financial regulator with the powers to do things like set minimum capital requirements for banks or draw up international accounting standards.
Compliance With Standards Is Voluntary
Such regulations are drawn up by the Basel Committee on Banking Supervision, which brings together central bankers from more than two dozen countries. But the Basel Committee works on the basis of consensus among its members. Compliance with its standards is voluntary.
The International Organization of Securities Commissions (IOSCO), which groups together financial regulators from more than 100 different countries, also works on the basis of consensus and voluntary compliance by its members.
Nobel Prize-wnning economist Joseph Stiglitz believes banking lobbyists are slowing down reform.
In 2009, the Group of 20 (G20) established the Financial Stability Board to promote international financial stability and transparency. It brings together all of the G20 finance ministries and central bankers as well as international financial bodies.
But the IOSCO and the Basel Committee have been reluctant to take instructions from the Financial Stability Board or its predecessor, the Financial Stability Forum.
Even within regional economic groups, such as the eurozone, national governments have hesitated to surrender their sovereignty to a stronger central state in Brussels when it comes to fiscal federalism in Europe.
Lack Of Interaction
This is still the case despite the sovereign debt crisis in Europe and the pressures the euro currency has been under.
"What is lacking is really a more fundamental discussion about how economic institutions, economic policies, and political institutions interact in Europe -- and how we can move this interaction forward," says Anke Hassel, a professor of public policy at the Hertie School of Governance in Berlin.
"Obviously, the European economy is at a crisis point and at a turning point. And we need new ways of dealing with that."
Eddy Wymeersch, the former chairman of the Committee of European Securities Regulators, suggests that the global economic crisis has brought the world further from establishing some form of global financial authority.
The 2001 Nobel laureate for economics, former World Bank chief economist Joseph Stiglitz
, believes that banking industry lobbyists have been responsible for slowing down the drive toward regulatory reform.
"There was a slight attempt [at reforming financial-sector regulation] after 2008 but it was beaten back by the banks," Stiglitz says. "A little bit happened, but for the most part it was beaten back. And we haven't dealt with the underlying problems.
"And in fact, some of those underlying problems have gotten worse -- [banks that are] too big to fail, inequality, all those things have actually been exacerbated by the crisis itself."
Britain is a case in point when it comes to financial-sector lobbyists and national interests conflicting with calls for global regulatory reforms.
At the start of the global economic crisis, the British government initially said its system of financial regulation was no longer suitable and needed to be replaced with a framework to promote "responsible and sustainable banking."
In a bid to bring banks back toward more traditional banking practices -- rather than acting as risk-taking hedge funds -- the British government proposed regulatory powers that would discourage risky bank lending.
The British Treasury also argued that banks that pose a bigger risk to the financial system as a whole -- either because of their size or interconnections with other banks -- should face greater regulation.
But in the end, many of the proposed reforms stalled amid arguments from figures within the financial sector that tighter regulation could cost Britain its role as a financial hub for Europe.
EU proposals for tighter hedge-fund regulation were resisted by London as "anticompetitive."
The British government concluded that regulation must be agreed at a global level so that firms don't simply migrate to countries with less stringent regulations.