Institutional Choice in Financial Regulation - The Concept of Delegation

Global financial regulation is institutionally fragmented. Different bodies govern different issue areas or sectors. The pattern of delegation to these global regulatory bodies exhibits remarkably high variation. Sometimes regulatory competence is delegated to governmental actors who are either bureaucrats (transgovernmentalism) or hold cabinet positions (intergovernmentalism). Examples of the former include the BCBS or IOSCO, the IMF, and the World Bank are examples of the latter. Other regulatory institutions are (mostly) private, i.e. their membership is made up of non-state actors (transnationalism). IADI falls into that category. But not only are these bodies made up of different actors, they also differ with respect to the authority they have been delegated. For example, the IMF and the IASB have the authority to formulate and adopt policies, whereas others, like the CGFS, can only make recommendations. Other institutions, like the FSB, even feature a mild form of monitoring (peer review). And finally, the degree of (ex-post) control that governments have over these bodies varies. While the Plenary of the FSB relies on consensus decisions, thus giving individual governments veto control, the Board of Governors of the IMF employs a simple majority rule with a quorum of two thirds, thus giving no veto power to individual governments. Together these features determine the degree of independence an international institution enjoys from national governments. In this paper, we conceptualize and measure delegation. We provide a concept of delegation by analytically distinguishing the following three dimensions: (1) Who is authority delegated to (actors and bodies)? (2) What competencies do the bodies hold (authority)? (3) How does the collective principal take decisions (pooling)? We submit that the institutional design in these three dimensions, which we will operationalize as five distinct parameters, and the interrelations between them, determine the degree of independence an institution enjoys. We assign parameter values to each institution and propose a way of aggregating these into a measure of independence through vector addition. On the basis of our conceptualization of delegation, we advance the argument that our three-dimensional conceptualization adequately captures all of the important concerns that various groups of political scientists engage with when discussing delegation. Most importantly it bridges an unnecessary and analytically incomplete divide between classical IR scholars on the one hand and IPE respectively global governance scholars on the other. While the former are predominantly concerned with the authority and control dimensions, the latter have focused mainly on the actors and bodies dimension. Our frame-work brings these aspects together and demonstrates the interlinkage between them. (In later research, we plan to use this new concept as the dependent variable. Why are certain actors chosen for a regulatory task? What explains the extent of the authority grant? Why is a certain degree of ex-post control chosen? In short, what explains the pattern of delegation, and thus varying degrees of independence, in global financial regulation?)