FINANCIAL MARKET LIBERALIZATION

Financial Market Liberalization

Financial Market Liberalization

Introduction

The recent financial crisis has led to widespread recognition of the need to re-regulate the financial sector and reverse financial liberalisation. However, in many countries across the world conventional financial reform framework is still being followed compare to the new reform agendas that have been presented by different financial entities.

Major entities have still not realized the adversity of financial crisis such as WTO (World Trade Organizations), GATS(General Agreement on Trade in Services) and FTA (Free Trade Agreements); they are focusing on liberalizing the investment and trade in ascertain financial services. As a result, financial market liberalization and other bilateral trade agreements have forced government to move towards stringent financial regulation policies that have significant effect on the financial stability and economic growth of country.

Occurrence of financial crisis in 2008 forced multiple financial framework reforming organizations to stabilize the market liberalization. G-20 countries decided to pioneer new regulations in the financial sector. These countries suggested that free trade is one of the optimal solutions to minimize the impact of financial crisis on economy. WTO participation in the discussion was to conclude the negotiations in the form of establishing financial framework which also included bilateral trade agreements for countries willing to adjust their financial framework and markets according to suggested measure system. Liberalization of financial services was the prime focus of these trade agreements. However, a contrasting critique was given by the UN Commission Experts on the Global Economic and Financial Crisis. They suggested that such policies will limit the economic growth of economies. Professor Stiglitz, one of the renowned UN Commission experts, suggested that the framework for financial market liberalisation under the Financial Services Agreement of the GATS under the World Trade Organisation and, even more, similar provisions in bilateral trade agreements may restrict the ability of governments to change the regulatory structure in ways which support financial stability, economic growth, and the welfare of vulnerable consumers and investors.

This paper aims to examine the legal implications of actions taken to improve the stability of the global financial system. This paper evaluates the financial framework presented by financial institutions and realistic approach towards economic recovery from financial crisis. It assesses the impact of change direction in the ongoing GATS and FTA negotiations on liberalization of financial services to improve the stability of the global financial system.

Liberalisation of Financial Markets

Recent financial crisis increased the need of reforming global financial regulation. WTO and EU emphasized on the principle approach of financial reforming through collaboration of free trade negotiations between countries to liberalize their financial services. WTO emphasized on the fact that financial market liberalization is not the direct cause of financial crisis and causes of financial crisis relates to the poor economic policies and spending by economies. GATS emphasized on spreading the risk of financial products and services. In addition to that, WTO based its framework on the principle that liberalisation creates international competition. Increasing competition between different financial markets enhances the risk of financial ...