Who Governs Finance? The Shifting Public-Private Divide in the Regulation of Derivatives, Rating Agencies and Hedge Funds

The division of responsibilities in the regulation and supervision of financial markets between public regulatory agencies and private market actors is not fixed; it has radically changed across time. This paper argues that the financial crisis of 20072009 has triggered the latest turn in the publicprivate divide in the regulation of finance. Focusing in particular on the extensive reforms that have been introduced in the regulation of over-the-counter derivatives, credit rating agencies and hedge funds in Europe and internationally, this paper argues that the response to the financial crisis has brought to a halt the reliance on self-regulation and market discipline as primary regulatory mechanisms that had characterised the approach of regulators prior to the crisis. However, while public regulatory agencies have consolidated in their hands the authority to regulate and oversee markets previously left outside their regulatory oversight, the content and the purpose of their regulatory intervention continue to present significant element of continuity with the pre-crisis regulatory model.