30 May 2008
Embracing financial globalisation
This report details the nature, impact and policy response to financial globalisation. The report has three objectives:
a. to make a strong case for continued financial openness, backed by robust research;
b. to publicise what the international community is doing to improve stability in the global financial system; and
c. to set-out HM Treasury’s views on how the global financial system can be made more robust and efficient.
Over the past two decades, the financial integration of the world’s economies has proceeded at a far faster rate than growth experienced in trade of goods or services. While in the 1970s the value of international trade in goods and services and international finance was comparable, now the level of international finance is 7 times that of international trade.
However, in recent years, significant support has been expressed in both developing and developed economies for financial protectionism.
The report acknowledges the challenges financial globalisation presents, particularly to financial stability. However, it concludes that, if the appropriate regulatory and supervisory architecture are in place, financial globalisation can deliver significant benefits for all countries in the form of enhanced economic growth and stability. Moreover, the report argues that protectionism both denies countries access to these growth and stability benefits and fails to protect economies against financial instability.
The report states HM Treasury’s policy objectives for the global financial system, which are that it should be:
a. open to all countries, supporting economic growth for all;
b. promoting financial and economic stability; and
c. functioning efficiently to minimise costs for investors and consumers.
The report concludes by detailing the policies that HM Treasury will pursue to achieve these objectives, which will sit within a carefully defined framework of:
- making the case for financial openness and taking practical steps to achieve it; and
- developing an effective international regulatory system that can:
- i. provide an early warning system for emerging financial risks;
- ii. facilitate the implementation of the appropriate regulatory response to financial instability by:
- keeping pace with market developments and new financial instruments; and
- pursuing, where appropriate, the convergence of international regulatory standards.
- iii. deliver effective cross-border supervision of firms and markets.
The document is available in Adobe Acrobat Portable Document Format (PDF). If you do not have Adobe Acrobat installed on your computer you can download the software free of charge from the Adobe website. For alternative ways to read PDF documents and further information on website accessibility visit the HM Treasury accessibility page.