When Professor Rosa Lastra completed her earlier book on Legal Foundations of International Monetary Stability (OUP, 2006), I very much doubt whether she then expected that so much would change in the subsequent eight, or so, years that a major rewrite, a re-assessment, would be necessary, as indeed it is. It is, perhaps, symptomatic that the word Stability has been dropped from the title of the new book. It was not, however, as if everything had been totally stable and constant prior to 2006. As I wrote in my Foreword then, ‘Over the past fifty years [1960–2006] this simpler structure [of national and international financial systems] has dissolved and been reformulated in a much fuzzier and more complicated system.’ But that reformulation into a more liberal, global and market-oriented system seemed complete by 2006. In 2006 the ‘Great Moderation’ was still working, and Central Bankers, who were deemed to have made it work, were widely applauded. New financial innovations were supposed to have made the system safer. In efficient markets, bankers should control risk for themselves, so only ‘light touch’ regulation should be necessary; the golden eggs laid by such bankers were so widely rewarding that the increasing share appropriated by top management was barely noticed, or even treated as a condign incentive. The euro had seamlessly replaced the prior national currencies, and the ‘nay-sayers’ disconcerted. The IMF’s role was narrowing to looking after emerging economies, and, as these regained strength after the 1997/98 South East Asian crisis, there were concerns whether the IMF would be making enough loans to earn the money to pay its staff!
One only has thus to recall the financial circumstances of 2005/6 to realize what an enormous amount has changed since the onset of the Great Financial Crisis in 2007/8, plus the subsequent travails in the eurozone. Concepts and ideas have changed; institutional roles have been altered at a breathtaking speed, for banks, investment banks, central banks and the IMF (who could have foreseen the Troika ten years ago?), and also for market structures. This has necessarily been driven and accompanied by a whirlwind of new financial regulations, the Dodd-Frank Act, more EC financial Directives than I can count, or remember, and a complete recasting of the regulatory structure in the UK, involving centralisation of regulation in the Bank of England at the same time as partial separation (ring-fencing) of the major commercial banks.
This process of institutional and regulatory change remains ongoing. Nevertheless its pace may now slow. In the US the political face-off between Republicans and Democrats will prevent most legal initiatives over the next few years. Elsewhere fading memories of the Great Financial Crisis, and the need to underpin a sluggish European recovery with additional bank credit expansion, may lessen the enthusiasm for further tougher bank regulations; there will be a need to digest what has been force-fed to the financial system in recent years. Having embarked on the most extraordinary practices of unconventional monetary policies (UMP), central banks, or at least those where recovery has become established, are looking forward to clawing their way back to normality, or perhaps to the ‘new normal’, (p. vi) whatever that may be. So there may now be something of an inflection, a hiatus, in the pace of institutional and regulatory change.
In short, the present is a good moment to take stock of the recent momentous changes to International Financial and Monetary Law, and there is no one better qualified and able to do so than Rosa Lastra. She is primarily an (excellent) lawyer, and this is primarily a legal tome. But no one could do justice to this broad subject without a wide range of interdisciplinary skills, especially economics, international relations, politics, and current history, and a thorough knowledge of the context in the Eurozone, the USA and the UK, plus the relevant international bodies in Basel (eg, BIS, FSB) and Washington (IMF). Rosa has all these skills and knowledge in abundance. Indeed, I do not know of anyone else with an equivalent, and so necessary, skill set.
In additional to sheer ability, Rosa has drive, dedication and great management skills. I marvel that anyone could bring up four lovely teenage children, run a happy home, undertake a full professorial teaching and administrative load, and still find the time and space to do as much excellent research and writing as she has done.
London School of Economics