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peer review and transnational financial regulation October 17, 2011

Posted by Bradley in : transparency , trackback

How meaningful are peer reviews as a mechanism of ensuring that states comply with transnational standards of financial regulation? In April 2009 responding to the financial crisis the G20 countries announced that they would monitor compliance with international standards. Members of the Financial Stability Board committed to:

undergo periodic peer reviews, using among other evidence IMF/World Bank public Financial Sector Assessment Program reports

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This doesn’t sound too bad – IMF members produce regular reports on their financial systems, so there is some information available anyway that the FSB can use as the basis for peer reviews. But there are some huge time lags – the peer review of Australia published in September 2011 states that:

The analysis and conclusions of the peer review are largely based on the Australian financial authorities’ responses to a questionnaire designed to gather information about the initiatives undertaken in response to the relevant FSAP recommendations.

The footnote cites to the IMF’s FSAP assessment of Australia dated October 2006. What faith can one put in a peer review that is “largely based” on data over 5 years old (the FSAP assessments are themselves produced long after the missions on which they are based)? In fact the peer review contains a lot of information dated after October 2006. So what then to make of the “largely based” language? There’s a lack of transparency here with respect to the methodology used to create the peer reviews, although they are piggy-backing on the FSAP which has been established for some time and subjected to reviews by the Independent Evaluation bodies of the IMF and the World Bank the FSB work on the peer reviews is new and not clearly explained. The FSB provides a list of the members of the committee responsible for standards implementation but no details about their working methods. So it isn’t obvious how meaningful these documents actually are.

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