Gordon Brown and Nicolas Sarkozy on Global Finance and Regulation

The term international financial management is used quite a lot in the modern business world. It refers to the financial management with respect to the broad international business environment. The reason the above aspect is such an important feature of globalization is because it comprises all the important factors characterizing the international business environment. International financial management strategies must put into consideration the issue of different currencies, varying political systems, diversified sets of opportunities, as well as the effect of imperfect markets. International financial management came to life when various countries embraced the concept of opening trade doors to one another.

The article discussed here was composed by Mr. Brown and Mr. Sarkozy who at the time of its publishing were the Prime Minister of United Kingdom and the President of France, respectively. At the time of the article, they noted that Europe had led due to its efforts and results in combating the effects of the global financial crisis from which the world was recovering. Their success so far was as a result of restructuring Europe’s banking structure in the pursuit of strengthening the entire world’s financial system. Since the outset of the crisis, it was Europe that established and promoted globally coordinated fiscal stimulus.

At the time, the financial markets in Europe were relatively open, stable and competitive to stand up as essential determiners of global growth. Mr. Brown and Mr. Sarkozy note that very few people understood the risks created by the huge trading networks dealing with sophisticated products and extremely short-term massive rewards. In light of the above, the European Union adopted new rules for regulating the financial sector aimed at avoiding another case of the global financial crisis. The new rules focus specifically on controlling the agencies responsible for credit ratings, strengthening the deposit guaranteeing systems, as well as increasing the capital requirements necessary for the securitization of complex products. All the above was coupled with implementing stricter capital rules for the bank.

As required in effective international financial management, the European Union agreed to the establishment of more efficient systems to supervise the financial sector developments. The rationale behind the above was to closely monitor any systematic risks that may arise, as well as ensuring that the European Union regulations are followed consistently by national supervisors in various member countries. The banks were advised to embrace the practice of maintaining sufficient amounts of capital, rewarding only genuine value, ensuring liquidity at all times, and keeping off from short-term risks.

Mr. Brown and Mr. Sarkozy were proposing a long-term global compact reflecting upon the responsibilities of the banking system and the risk posed by those responsibilities to the entire world’s economy. The mix in the international finance management proposal included consideration for insurance premiums, resolution funds, levies on international financial transactions, as well as taxes on bonuses. The rationale for the above recommendations found the basis on the fact that the positive results in the United Kingdom and France in 2009 resulted from the government supporting the banking system.

However, in the pursuit of embracing the core provision of international financial management, Mr. Brown and Mr. Sarkozy stressed upon the core necessity. They emphasized the fact that for the success of the above provisions, all actions require implementation at the global level. Their main recommendation was that once a solution to a financial crisis is found, it should be implemented in all the major global economies. The above protects taxpayers across the globe from paying for a systematic crisis originating from the banking sector.

 

 

References

Brown, Gordon and Nicolas Sarkozy. “For Global Finance, Global Regulation.” The Wall Street Journal (2009): Online.

HTML Snippets Powered By : XYZScripts.com