Securing finance: the paradox of Steuart's watch

Abstract

This paper examines the changes that have been made to the global financial architecture in the aftermath of the financial crisis and argues that the reforms are confronted with a paradox. Intervention is required to ensure the smooth running of the economy, yet too heavy a hand risks disrupting a central circuit of capital. We have recently witnessed a tightening of the regulatory mechanism such that the parameters of risk taking have been reduced—financial activity now modulates within a more risk adverse environment. Yet, the reforms are not as radical as they could have been, reflecting the need to ensure effective and efficient circulation within an increasingly important area of the economy. However, a stronger emphasis on pre-emptive surveillance has emerged, which may partly compensate for the lack of radical reforms in other areas.

Notes

¹ Foucault further adds that there is ‘the appearance in this new art of government of mechanisms with the function of producing, breathing life into, and increasing freedom, of introducing additional freedom through additional control and intervention’ (Foucault 2008, 67).

² ‘The field of interventions for security dispositifs is organized around the following question: “How should things circulate or not circulate?”’ Foucault defines a security dispositif as a ‘heterogeneous ensemble consisting of discourses, institutions, architectural forms, regulatory decisions, laws, administrative measures, scientific statements, philosophical, moral and philanthropic propositions’ (Foucault 1980, 194).

³ The capital requirement of seven per cent of risk-weighted assets will comprise ‘a minimum common-equity target of 4.5% of assets, to be reached by 2015, plus a “conservation buffer” of 2.5% of assets (which can be drawn upon with restrictions in times of stress) to be in place by 2019’. The total Tier One capital that includes common equity will be 8.5 per cent (The Economist 2010c, 89; Basel Committee on Banking Supervision 2011).

⁴ For example, the German Corporate Governance Code of 2002, the French Financial Security Law of 2003 and the Japanese Financial Instruments and Exchange Act of 2006.

⁵ Although they could still prepare a client's tax returns.

⁶ Although it should be pointed out that a seven-year rotation was supposed to be a commonly adopted standard in the industry anyway.

⁷ ‘Whilst ESRB recommendations are not legally binding they cannot simply be ignored. Addressees of recommendations must state whether they agree with the recommendation or not. If they agree, the addressees are expected to communicate what action they are taking whilst if they disagree and choose not to act, the reasons for inaction must be properly explained’ (section three, point 49 in House of Commons Treasury Committee 2009).

⁸ The ESA is made up of three constitutive elements arising from the transformation of previous committees: the EBA, the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA).

Additional information

Notes on contributors

John Glenn

John Glenn is a senior lecturer in politics at the University of Southampton. Email: [email protected]