The flaws of fragmented financial standard setting: why substantive economic debates matter for the architecture of global governance

In the half decade following the 2007 financial crisis, the reform of global financial governance was driven by two separate policy debates; one on the substantive content of regulations, the other on the organizational architecture of their governance. The separation of the two debates among policymakers has been mirrored in academia, where post-crisis analyses of financial governance have remained detached from reinvigorated discussions about the nature of financial markets. We argue this separation is deeply flawed. Presenting an analysis of interactions between standards for banking, credit rating, accounting and derivatives trading, this article demonstrates why the appropriateness of the organizational architecture of global financial governance is necessarily contingent upon one’s understanding of how financial markets work. In particular, if financial markets are not anchored to external "economic fundamentals" but instead demonstrate reflexivity, the reciprocal interactions between different regulatory arenas demand considerably more organizational coordination than is presently the case.