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During the past two decades or so, capital controls have been lifted, national capital markets have been liberalized and international capital markets have exploded among the advanced industrial economies and beyond. As major players with significant stakes in the smooth operation of international capital markets, the United States and Europe have common interests in the emergence of a regulatory framework that enhances market stability, minimizes systematic risks, and allows for the efficient operation of markets. Yet despite the growth in cross border capital movements, regulatory cooperation is at times plagued by differences in national approaches and preferences, difficulties coordinating rules where multiple regional or international organizations are involved, and regulators' reluctance to cooperate fully with foreign jurisdictions...
A single chapter cannot do justice to the range of rules and agreements that have been made among the banking and securities regulators of Europe and America over the past decade. Rather than strive for exhaustiveness, this chapter selects three issue areas that illustrate particular dynamics of rule development: capital adequacy standards for internationally active banks; anti–money laundering efforts; and international accounting standards for foreign listings on local stock exchanges. There are two key dimensions that these cases illustrate: the problem of defection (which demands stronger rules of surveillance and sanction than mere coordination problems), and the issue of the scope of agreement (systematic problems demand multilateral solutions).