Global financial governance is marked by a paradox: while financial markets are among the fastest evolving economic activities, their governance is most often reactive rather than forward-looking. As the previous chapter (Germain) in this volume confirmed, dramatic changes in the patterns of global financial governance are most often triggered by major financial crises which politicise the regulatory debate and pressure policy-makers to react. But once the storm has passed, both public authorities and private actors tend to be affected by what Reinhart and Rogoff (2008) have called the ‘this time is different syndrome’. Confidence is restored and complacency sets in until a new storm breaks out, opening a new cycle in the governance of financial markets.

Recent experience has been no exception. Between 1994 and 2001, the world financial system was shaken by a series of major crises emanating from ‘emerging markets’, most notably Mexico in 1994, East Asia in 1997–8 and Argentina in 2001. These crises prompted the leading financial powers of the G7 to launch a set of ambitious regulatory and institutional reforms to create a ‘new international financial architecture’ (NIFA). This reform agenda has been well-documented elsewhere (e.g. Eichengreen 1999; Kenen 2001) though post-2001 results have received less attention. After briefly outlining the NIFA project, we highlight in this chapter how the absence of serious international crises between 2001 and 2007 weakened the urgency of this reform agenda for G7 governments and scaled back the level of ambition, yielding greater reliance on market-based governance mechanisms.