Paper short abstract:

This paper assesses the public policy objectives pursued by the Brazilian Central Bank in its efforts to align the national financial regulation with international standards. It explores the interplay between context-specific factors and the integration agenda, focusing on issues of accountability.

Paper long abstract:

It is often said that a globalized financial system impinges on the democratic choices of developing countries. According to such narrative, market sanctions and other types of retaliation coerce States to harmonize their domestic regulations with the standards set by institutions regarded by many as non-democratic, illegitimate and unaccountable.

However, the domestic incorporation of international standards can serve multiples purposes, not necessarily linked to an agenda of integration and liberalization. In other words, the harmonization between domestic legal systems and supranational norms is driven by a myriad of factors that can only be explained through detailed case studies.

By drawing on the experience of the Brazilian Central Bank with crisis management, the paper will seek to identify the official and the concealed public policy objectives pursued by the authority in its efforts to align the national financial system's regulation and its own supervisory practices with the international standards.

The empirical analysis will cover three episodes of financial crises: 1) The structural "cleaning-up" of the financial system after the monetary stabilization (mid-90's); 2) The adverse impacts of the devaluation of the currency (late 90's); and 3) The failure of small and medium-sized banks in the aftermath of the 2008 global financial crisis (GFC).

As the pattern of the monitoring of domestic incorporation of supranational standards has changed since the GFC, and given that developing countries have become members of the main international regulatory bodies, the paper will also assess the effects of these changes on the accountability of the financial regulators.