Small country interfaces with the world’s financial rule-makers: Case of Bahamas

John Rolle, Governor of Central bank of Bahamas gives a speech on the topic :

My topic tonight is: “How Small Nations Interact with the International Financial Rule-Making Architecture”. The core elements in this architecture include:
– Multilateral agencies, among which the IMF is probably the most impactful for small countries, and the BIS the most impactful for the world’s central banks;
– Rule-making bodies, among which the Basel Committee is probably the most prominent, but including the international Association of Insurance Supervisors (IAIS), the International Organisation of Securities Commissions (IOSCO), and similar groups, with the Financial Stability Board (FSB) assuming prominence in recent years;
– The ever-growing architecture on financial crime suppression, centred on the Financial Action Task Force (FATF); and
– A range of public, quasi-public, and private groups that create, impose, and/or enforce standards in international finance, among which leading examples include the ratings agencies, SWIFT, ISDA, LCH and many others.

What should these international agencies do to hear the small nations:

From a small country perspective, the ideal engagement with an international rules-making body would feature four key elements:
– The body explicitly considers small countries when making and enforcing rules; – The body provides, directly or through its membership, reasonable assistance to help small countries adopt and maintain the relevant rule set; – The body’s governance arrangements allow for small country representation, and for staff from small countries to engage on working groups, task forces, secretariats, and the like; and
– When conducting compliance assessments and similar engagements, the body’s evaluation process gives small countries a fair chance to demonstrate compliance, in the context of each country’s economy and society.

My experience, both directly and through engagement in the Caribbean and elsewhere, is that most international rules-making bodies lack comprehensive policies in the above areas, but there is generally sincere goodwill expressed by these bodies. Put another way, few international rules-making bodies are set up to disadvantage small countries, but several of them can bruise us inadvertently, and we would like to see international practice improve to reduce this bruising.

The challenge in part relates to focus on rules making to affect outcomes of a globally systemic importance; outcomes which are less likely to be the case for economic events and economic actors in small countries. As such, conceding to small country concerns is often a question of quantifying and recognizing the unintended or spillover consequences of international standards; and determining how or sometimes whether to act to offset adverse externalities. Small countries often have difficulty interfacing with the major international rule-making bodies, and it is clearly not the case that every such body should be expected to engage individually with about 200 countries. This is where regional groups shine, and among these groups, ASBA has been particularly helpful for Latin American and Caribbean small countries. We thank ASBA for their past, present, and doubtless future good work.

Nice bit on an issue which we rarely care about…

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