Containing extraterritoriality to promote financial stability

The extraterritorial effect of national regulations has become a topic of acute concern with the intensification of regulatory measures after the financial crisis, notwithstanding the G20’s efforts to promote global standards of financial-industry regulation. This article points out the need for high-level attention to the practical complexities, intrusiveness and inefficiencies arising from the extraterritorial reach of specific national legislation. Adequately strengthening and promoting international coordination of financial regulation is of the essence in order to prevent regulatory arbitrage and avoid fragmentation. It highlights the fundamental role the Financial Stability Board should play to foster more coordinated and sustained international efforts to minimise extraterritoriality of national rules and manage down inefficiencies in order to facilitate the smooth achievement of G20 objectives and to eliminate barriers to doing business on a cross-border basis.