Are country peer reviews credible?

Description

Peer reviews of G20 financial regulatory quality and market responses

Presented by Andrew Walter (University of Melbourne) with Young Cho

Since the Global Financial Crisis that peaked in late 2008, G20 countries pledged to improve the quality of their financial regulatory frameworks and to the full implementation of agreed financial regulatory reforms. Improved monitoring, including via published peer reviews of implementation under the auspices of the Basel Committee for Banking Supervision (BCBS) and the Financial Stability Board (FSB), are seen as important inducements to national implementation. This governance reform strategy makes two related but largely untested assumptions: how credible are G20 peer reviews, and how do financial markets – the main external source of implementation pressure – respond to them? To answer these questions, we use content analysis to measure whether and how BCBS and FSB peer reviews differ significantly from IMF staff reviews of national financial regulatory frameworks, and then assess how financial markets respond to them. Preliminary results suggest that there are systematic differences between different review types and that markets respond differently to their publication, though not always as we predict.

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