Daniel Hemel


The conventional wisdom among scholars and policymakers holds that international regulatory coordination is more likely to arise when regulatory authority at the domestic level is consolidated within a single body rather than dispersed across an array of agencies. Many prominent participants in the ongoing debate over U.S. regulatory reform-including former Treasury Secretary Hank Paulson and former Federal Reserve Chairman Paul Volcker-have cited this supposed connection between domestic regulatory consolidation and cross-border coordination as a reason to reduce the number of U.S. agencies that share supervisory authority over the financial sector. Scholars, however, have not rigorously tested this hypothesis. This Note is a first step toward filling this gap. It examines how changes in U.S. domestic regulatory structures across the commercial banking, securities, and insurance sectors have shaped cross-border coordination over the last twenty-five years. These case studies suggest a surprising conclusion: contrary to the conventional wisdom, regulatory consolidation at the domestic level appears to be negatively correlated with cross-border coordination. When regulatory authority is fragmented among several agencies at the domestic level, U.S. financial regulators turn to their cross-border counterparts in order to circumvent roadblocks erected by domestic rivals. By contrast, in areas where a single regulatory agency enjoys consolidated control over a particular policy matter at the domestic level, that agency is less willing to restrict its policymaking discretion through an international agreement.

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