James, S. and Quaglia L. (2019), “The UK as a Conflicted Pacesetter in Trading Up Post-crisis International Derivatives Regulation”, Annals of the Fondazione Luigi Einaudi, 53(2): 229-246.
The United Kingdom (UK) hosts a leading international financial centre and has a large financial sector. This jurisdiction has traditionally been very influential in international standard-setting bodies in finance. Whereas prior to the international financial crisis, the UK was often keen to ‘trade-down’ international standards, after the crisis, the UK has pursued increasingly stringent financial regulation in certain financial sectors, such as derivatives. What accounts for this ‘trading up’ approach? In order to address this question, we adopt a two-step analytical framework. The first step examines the process of national preference formation by identifying three sets of key domestic players: elected officials (namely, government ministers and members of parliament); unelected officials (central bankers and financial regulators); and the financial industry. The second step explains the UK’s regulatory strategies and influence over regulatory outcomes at the international level.