Markets and Morals: Embedding values in the governance of the financial services sector

The document argues that the 20072008 global financial crisis was exacerbated by a convergence of power between elite financial circles and government regulators, where deregulation allowed corporations to exploit legal loopholes and offload risks. It contends that technical regulatory reforms are insufficient if they do not address the underlying mindset and values of these power sources. The author suggests that reinforcing fiduciary duty, implementing negative licensing, and ending 'financialization' are potential paths toward reform. Ultimately, the paper proposes that societies should reduce their dependence on the financial sector for the delivery of essential social services and environmental sustainability to mitigate the risks of future systemic failures.

• Deregulation over two decades led to a convergence of power between big financial corporations and governments, resulting in lobbying and influence that favored elite interests over public good.
• Prior to the 20072008 crisis, US financial corporations used the repeal of the Glass Steagall Act to exploit legal loopholes, using securitization and instruments like collateralized debt obligations (CDO) to move risky assets off-books.
• Regulatory failure was driven by fragmented supervision, curtailed budgets, and rules that allowed banks to use their own models to estimate credit risks under Basel II.
• The financial sector is characterized by a 'revolving door' where individuals move between leadership roles in regulatory agencies, such as the Bank of International Settlements and the Financial Stability Board, and private financial corporations.
• Speculative capital flows significantly outweigh foreign direct investment; for instance, in 2007, global FDI inflows were US$1.5 trillion, while speculative capital was over 10 times that value.
• Effective reform requires moving beyond narrow directives to influence the mindset of financial elites, potentially through reinforcing fiduciary duty or implementing 'negative licensing' to remove the rights of financiers who exacerbate systemic risk.
• Because changing the values of the financial elite is difficult, societies should lower their reliance on the financial sector for essential services such as health, education, transport, energy, and food.

APA

Perera, O. (2012). Markets and Morals: Embedding values in the governance of the financial services sector. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/markets_and_morals.pdf

Chicago

Perera, Oshani. Markets and Morals: Embedding values in the governance of the financial services sector. International Institute for Sustainable Development, 2012. https://www.iisd.org/system/files/publications/markets_and_morals.pdf.

Wikipedia

{{cite report |last1=Perera |first1=Oshani |title=Markets and Morals: Embedding values in the governance of the financial services sector |publisher=International Institute for Sustainable Development |date=June 2012 |url=https://www.iisd.org/system/files/publications/markets_and_morals.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{perera2012markets, author = {Perera, Oshani}, title = {{Markets and Morals: Embedding values in the governance of the financial services sector}}, institution = {International Institute for Sustainable Development}, year = {2012}, month = jun, url = {https://www.iisd.org/system/files/publications/markets_and_morals.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }