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Global financial governance has been demonstrated to be extremely weak during the crisis of 2007-2008. The G20 and the Financial Stability Board have taken the lead post-crisis with efforts to make international financial standard-setting more accountable and legitimate by involving more countries in the standard-setting process and by making deliberations more transparent and reflecting the views of a broader number of stakeholders. This crisis demonstrates the need to adopt a more holistic approach to financial regulation and supervision that involves linking micro-prudential supervision of individual institutions with broader oversight of the financial system and to macroeconomic policy. The authors argue that the ‘macro-prudential’ dimension of financial regulation will have important effects ON global financial governance and will require more accountability and legitimacy in the international financial standard-setting process. In this article, he first describes the development of international financial standard-setting from the 1960s to the reforms following the 2007–2008 crisis. The post-crisis international regulatory reforms are then considered and wondering whether they adequately address regulatory weaknesses and represent relevant stakeholder interests. Third, the chapter suggests that although international reforms have addressed the interests of wider stakeholder groups through macro-prudential regulation, more work should be done to address stakeholder concerns regarding the impact of environmental and social risks on financial stability. The discussion of the international financial standard-setting bodies’ efforts in this area and the need for them to be more inclusive in their membership suggests that international financial regulation should be more accountable and legitimate in how it is developed. Moreover, it suggests that the flawed economic policies and regulatory practices of the G10 advanced industrial countries do not provide sustainable models for economic and financial development. This means that the development of global financial regulation should be influenced more by countries outside the traditional G10 power structure and the regulatory standards should address broader risk factors that can have a significant effect on financial stability thereby contributing to more sustainable economic growth and financial development. In particular, environmental and social risks should be taken into account. The overall message is that economic policy-makers should consider building institutional mechanisms that transcend national borders which establish solidarity between the financial sector and all parts of society that are affected by financial risk-taking.
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