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international finance archive 2021

Week 12 (April 15) (International Finance and the Pandemic): At the beginning of the semester I said we would have a unit on the pandemic. During the semester we have noted some places where the pandemic creates implications for this class. In particular when we discussed issues relating to sovereign debt we noted that the pandemic causes financial pressures, particularly for some less wealthy countries. The most recent IMF Global Financial Stability Report suggests that wealthy countries will come out of the pandemic fine, with increasing risks for emerging markets, but also that there are issues with increasing business indebtedness. So the pandemic increases pressures to figure out a solution to the problem of unaffordable debt. But whereas we might think that a country that incurs unaffordable debt in normal times is not justified in restructuring debt to avoid repayment, we might think that an unexpected pandemic is a different situation.
The pandemic is an example of the sort of unexpected development that causes issues for international financial stability, that has been addressed to some extent by government interventions.
We saw also that the pandemic is seen as having accelerated the move to the use of digital payments and is seen as encouraging interest in Central Bank Digital Currencies.
With respect to contracting, the pandemic also raised issues about the application of material adverse change clauses or the interpretation of business interruption insurance policies.

Here are some readings to focus on for this week (but we can also discuss the issues mentioned above if you are interested):
1. Financial Stability Board, COVID-19 Support Measures: Extending, Amending and Ending (Apr. 6, 2021)
2. ESMA, EBA, EIOPA, Joint Committee Report on Risks and Vulnerabilities in the Eu Financial System (March 2021)
3. OECD, Fostering Economic Resilience in a World of Open and Integrated Markets(March 2021) (pp. 76-96)
4. FATF, COVID-19-Related Money Laundering and Terrorist Financing Risks (Updated Dec. 2020).

Week 11 (April 8): Readings for this week are as follows:
1. Fintechs and the banking system: Financial Stability Institute, Fernando Restoy, Fintech Regulation: How to Achieve a Level Playing Field (Feb 2021)
See also: Lucas Siegmund, A Fintech Charter by Another Name The Regulatory Review (Nov. 30, 2020)
2. Central bank digital currencies: Codruta Boar & Andreas Wehrli, Ready, steady, go? – Results of the third BIS survey on central bank digital currency (Jan. 27, 2021)
3. Initial coin offerings and securities law: James J. Park and Howard H. Park, Regulation by Selective Enforcement: The SEC and Initial Coin Offerings, 61 Wash. U. J. L. & Pol’y 099 (2020)
See also SEC v. Ripple Update: XRP Holders Confront SEC Over Their Losses.

You can find past exams for this class here.

On March 31 US federal financial regulators announced that they are seeking information on the use of AI by financial institutions, including fraud prevention, personalization of customer services, credit underwriting, and other operations. The request for information will be published in the Federal Register.

Week 10 (April 1, 2021): For class this week, please read:
1. As a link between our focus on issues relating to compliance and the very broad area of fintech,
Vivienne Brand, Corporate Whistleblowing, Smart Regulation and Regtech: the Coming of the Whistlebot? 44 University of New South Wales Law Journal 801 (2020)
2. For another take on suptech and regtech, Financial Stability Board, The Use of Supervisory and Regulatory Technology by Authorities and Regulated Institutions (Oct. 9, 2020)
3. OECD, Regulatory Approaches to the Tokenisation of Assets (Jan. 26, 2021).
I know you are all very busy and the circumstances are stressful right now. My aim with this selection of materials is to not overwhelm you with reading, but also to give us plenty to think about.

Week 9 (March 25, 2021) Please read International Finance Chapter 4C: Compliance

March, 22, 2021: Today the EU and the US announced human rights sanctions, including sanctions relating to the Uighur genocide in China. China retaliated.

Week 8 (March 18, 2021): For this week please read:
1. International Finance: Sanctions 2
2. Unicredit Bank Non-prosecution Agreement (Apr. 15, 2019)
3. Council Regulation (EU) 2020/1998 concerning restrictive measures against serious human rights violations and abuses
4. Council Decision (CFSP) 2020/1999 concerning restrictive measures against serious human rights violations and abuses
5. Emil Dall, UK Sanctions Policy: A Progress Report (Feb 18, 2021)

Week 7 (March 11, 2021): For this week please read International Finance Materials Chapter 4: Sanctions. The material introduces the idea of what sanctions are used for and some of their perhaps unintended negative effects, and includes some material relating to the EU and the US, including some examples of legal challenges to sanctions measures. Finally the chapter begins to introduce some issues relating to compliance and enforcement. There are some complex issues here: on the one hand people argue that over-compliance is harmful, but on the other hand there are clearly ongoing issues with respect to non-compliance.

I am also including links here to the 2 EU human rights measures cited in the chapter. These are not required reading for week 7, but next week I plan to focus on some specific examples of sanctions measures, including some US examples.

Council Regulation (EU) 2020/1998 concerning restrictive measures against serious human rights violations and abuses
Council Decision (CFSP) 2020/1999 concerning restrictive measures against serious human rights violations and abuses

Week 6 (March 4): Issues in Transnational Financial Regulation
The readings are a bit different this week. There is a large amount of financial regulation, much more than we could cover in one semester, so this section of the class introduces you to an example of transnational co-operation in financial regulation. We began to learn a bit about cross-border payments in the context of the Libyan Arab Bank case. Now we will think about the payments system as the plumbing of the international financial system (financial markets infrastructure). The Federal Reserve Policy document examines risks in the payments system and risk management (referring to the Principles for Financial Markets Infrastructures), and the second paper looks at payments regulation as it relates to fintech (I selected this paper as I think many of us are interested in issues relating to fintech (we will read some more material relating to fintech late)). The third paper looks at reserve currencies (with some discussion of payments system issues).

Federal Reserve Policy on Payment System Risk (Oct. 2020)

Tanai Khiaonarong & Terry Goh, Fintech and Payments Regulation: Analytical Framework, IMF Working Paper WP/20/75 (May 29, 2020)

Alina Iancu et al, Reserve Currencies in an Evolving International Monetary System, IMF Strategy, Policy, & Review Department & Statistics Department Paper 20/02 (Nov. 17, 2020)

Lectures: Law Debenture v Ukraine; Financial Markets Infrastructures

Week 5: February 25:Here is the reading material for week 5: International Finance Chapter 3c: Sovereigns 3
Lecture: Standard Form Contracts (including CACs)

This packet of material includes material in 3 different sections:

First, 2 cases arising out of the situation in Venezuela where Juan Guaidó’s claims to be recognized as interim President, accepted by many countries, led to situations involving competing claims to control of assets. So these cases raise different issues relating to sovereigns to those we have looked at so far. Not how courts adjudicate claims by creditors against sovereign debtors, but how courts may navigate sovereignty in other contexts.

Second, a question whether Ukraine can avoid obligations under a note issue to Russia (the holder of the notes) based on claims that the notes were entered into as a result of duress. The claim is brought in the English courts, so involves a domestic court navigating a dispute between two sovereigns. Normally we would expect this type of litigation to take place in an international court or arbitral forum, but that is not what is happening here.

Third, a case involving the English High Court deciding what impact unilateral US sanctions have on financial activity based in London (but where the deposit accounts in question are denominated in US dollars). This material at the end refers to IOSCO Principles for Financial Market Infrastructures, and therefore also relates to the regulation topic.

At the end of class on February 18 I noted the IMF’s suggestion that perhaps the UN Security Council might be an appropriate body to take action relating to sovereign debt issues created by the pandemic. Later on we will consider sanctions measures adopted by the Security Council. In Chapter 1 I wrote that mostly in the international finance context we are not dealing with international law as such. And when we were reading about sovereign immunity we were really focusing on the application of domestic statutes (in particular the FSIA) rather than on the international law relating to sovereign immunity. Again in thse cases we are seeing domestic courts applying domestic law, but there are also questions about the extent to which what the courts are doing is consistent with international law.

After Thursday’s class I added a couple of links to material I mentioned in class. You can find those links on the archive page now.

For week 4 (Class on February 18): International Finance Chapter 3b: Sovereigns 2.
Lecture: Sovereign debt: pari passu

In class February 18 I mentioned the ICMA CACs from 2014. If you are interested in the ICMA documentation you can look here.

If you are interested in Argentina’s 2020 restructuring you might enjoy: Andres de la Cruz & Ignacio Lagos, CACs at Work: What Next? (December 10, 2020). Available at SSRN: https://ssrn.com/abstract=3765825 or http://dx.doi.org/10.2139/ssrn.3765825.

For week 3 (class on February 11) For this class please read International Finance Chapter 3a: Sovereigns 1.
At the end of this section of the materials I outline what I think you learn from these materials:

We have begun to learn about the issue of holdout creditors, who have been able to disrupt the ability of sovereigns to restructure debt effectively.
We have learned something about the assignment of interests in sovereign debt, and the trading of financial claims.
With respect to assignment of debt and champerty we have seen that New York law is favorable to financial transactions (the rules facilitate assignment and also restrict the availability of the champerty defense). This may help to explain why New York law is commonly chosen as a governing law for financial transactions.
We have also learned something about standard form contracting, where standard language may be used without the contracting parties thinking too carefully about what the provisions mean (the pari passu clause).

For week 2 (Class on February 4): International Finance Materials Chapter 2: Transnational Investment in Securities
I think it makes sense for class on Thursday to spend most time on the US materials rather than on the examples from other jurisdictions.
Added February 2: Lecture: Transnational Investment in Securities 1; Transnational Investment in Securities 2

Just for your information, here is a link to the statement by SEC Commissioners on the GameStop etc issues we discussed last week. Here is an excerpt:

As always, the Commission will work to protect investors, to maintain fair, orderly, and efficient markets, and to facilitate capital formation. The Commission is working closely with our regulatory partners, both across the government and at FINRA and other self-regulatory organizations, including the stock exchanges, to ensure that regulated entities uphold their obligations to protect investors and to identify and pursue potential wrongdoing. The Commission will closely review actions taken by regulated entities that may disadvantage investors or otherwise unduly inhibit their ability to trade certain securities.

Assignment for Thursday January 28

Here are the Class Policies

Here are the reading materials for the first week of class: International Finance Chapter 1: Introduction.

Materials for the class will be available here. You can find the information about the zoom sessions on Blackboard. I move material from this page to the archive page each week so the current information appears on this page. There is also a page where I collect the class materials for this semester.

I look forward to seeing you next week. Happy New Year.

For the first class: People who take this class often have very varied backgrounds and one of my objectives for the first class is to learn something about you and your interests, so please be prepared for that on Thursday. The course materials page is organized around the topics I plan to cover but this is a class where we have some flexibility, so if you have areas/issues you would like to learn about I will see what I can do to accommodate those interests.

Here is a short narrated powerpoint presentation on writing a paper: Writing a Paper
And here is another: An Introduction: Current Issues
Please watch/listen to these before class on Thursday.

For week 2 (Class on February 4): International Finance Materials Chapter 2: Transnational Investment in Securities