1. There seems to be a widespread consensus today that some form of regulation of international finance is needed in order to take full advantage of the potentially huge benefits of open markets for capital while at the same limiting the risk of serious economic breakdown resulting from the inherently volatile character of those markets. It is generally recognised that the dismantling of exchange controls which started in the 1970s together with the development of modern computer and telecommunications technology over the last two decades have created unprecedented opportunities for global investment and international trade in capital: time and space have become virtually irrelevant in global financial markets. On the other hand, experience has shown that the sound operation of financial markets is threatened by instabilities which are far greater than those involved in the trade of goods and services. Financial collapses have a unique capacity for projecting their effects right across the domestic economy, and in the worst cases far beyond that, across the region and even across the world. The root causes for the instability of financial markets lie in the insufficient screening of investments risks by the providers of foreign capital and the local financial intermediaries alike, as well as in the huge potential for speculation created by the liberalisation of foreign exchange markets which can give rise to extreme fluctuations in short-term capital movements.

2. The need for regulating international financial markets can therefore hardly be questioned in principle.