Banking and Finance Law Commons^™

Digital Bank Holidays, Hilary J. Allen

Scholarly Articles in Law Reviews & Journals

The March 2023 run on Silicon Valley Bank spurred renewed debate about how to structure deposit insurance to best eliminate future bank runs. This Article argues, however, that deposit insurance cannot be relied upon to eliminate all bank runs, especially if technological developments create potential new bank run triggers that deposit insurance may not be responsive to. We may be expecting too much of deposit insurance, and so it is worth considering other tools that might be useful in responding to future bank runs and broader banking panics. One such tool is the “bank holiday,” last deployed in the United …

Restructuring Undefined Assets: Valuation Of Stablecoins And Their Impact On The Bankruptcy Process, Olivia Woodmansee

American University Business Law Review

Difficulties with defining cryptocurrency have plagued federal agencies and courts since crypto’s creation. With the emergence of “crypto winter” in 2022 that saw many crypto-related ventures fail, bankruptcy courts have been challenged to address numerous novel legal issues surrounding crypto-assets. When looking to the Bankruptcy Code fails to provide answers, courts must look to definitions, agency regulations, and an analysis of cryptocurrency’s position in the market to determine its classification. This can quickly become muddled with the voluminous and seemingly conflicting sources that exist. One such issue emerges when courts attempt to determine how to classify a particular cryptocurrency: is …

Exiting The Disaster, Evading The Responsibility? Wadi Al-Qamar -- The Moon Valley, Suzan Nada

Perspectives

This essay explores a case that delivered no results for the complainants, where harm was not prevented, and where stakeholders who filed the complaint were not compensated. Investigated by the Compliance Advisor Ombudsman (CAO) of the International Finance Corporation (IFC), the Wadi al-Qamar case illustrates some of the limitations of accountability mechanisms in limiting the harms caused directly or indirectly by projects in which the International Financial Institutions (IFIs) invest.

Legal Risk And Accountability In Development Finance: Lessons From Jam V. International Finance Corporation, Michelle Harrison, Shannon Marcoux

Perspectives

In a landmark decision in 2019, the U.S. Supreme Court ruled in Jam v. International Finance Corporation that international organizations like the International Finance Corporation (IFC), the private lending arm of the World Bank Group, can be sued in U.S. courts, ending the “absolute immunity” from suit that they had long claimed. The Jam lawsuit arose out of IFC’s gross mishandling of the Tata Mundra coal-fired power plant project in Gujarat, India, which has destroyed the livelihoods, environment, and way of life of local communities living in its shadow. The lawsuit, and especially the clash between IFC’s sweeping assertions of …

Comments On Federal Trade Commission Non-Compete Ban Proposed Rule, Matter No. P201200, Chaz D. Brooks

Scholarly Articles in Law Reviews & Journals

Within signed law professors and law students submitted this letter to the Federal Trade Commission, writing in their individual capacities, not as agents of their affiliated institutions, in support of the Federal Trade Commission’s proposed rule to ban most non-compete clauses (the “Proposal”) as an unfair method of competition.

This letter offers comments in response to areas where the FTC has requested public comment. To make our views clear, this letter contains the following sections: I. Summary of the Proposal; II. The Commission Should Consider Expanding Its Definition of Non-Compete Clauses to Prevent Employers from Requiring Workers to Quit Before …

Regulatory Managerialism Inaction: A Case Study Of Bank Regulation And Climate Change, Hilary J. Allen

Scholarly Articles in Law Reviews & Journals

In November of 2029, Hurricane Penelope struck New York City as a category two storm. Work had started on a wall to protect Manhattan from rising sea levels and storm surges, but the work was incomplete, and significant damage to Manhattan real estate was sustained. While almost all that real estate was insured, insurance companies were compromised by the sheer magnitude of the losses. Even with significant federal subsidies, they were unable to meet their full commitments on insurance policies. Some commercial real estate firms, who had never really recovered from the shift to remote working during the Covid pandemic, …

The Inspection Panel And International Law, Daniel D. Bradlow

Perspectives

This essay argues that the creation of the Inspection Panel (Panel) was an important international legal development. It was the first time that an international organization established a mechanism that enabled those communities and individuals who claimed they had been harmed by the decisions and actions of the international organization to hold the organization accountable. The creation of the Panel also promoted the role of non-state actors in making the soft international law that is applicable to the international financing of development projects. This essay will discuss each of these developments before drawing some conclusions about the Panel and international …

Can Mediation Provide Remedy For Human Rights Violations? A Quest For Justice Using A Development Bank Accountability Mechanism, Natalie Bugalski, David Pred

Perspectives

This essay describes what it takes—the enormous tenacity, solidarity, courage and skill required—for communities and their civil society partners to seek recourse through the dispute resolution processes of development bank accountability mechanisms. While these mechanisms can be the crucial centerpiece of an effective strategy, their critical shortcomings mean that community advocates must often engage in Olympian advocacy gymnastics to achieve even a small measure of redress. The essay makes recommendations for strengthening community-centered accountability in development finance, so that remediation and prevention of harm become the norm, and not the rare exception.

The World Bank, The Inspection Panel & Immunity, Joe Athialy

Perspectives

The establishment of the Inspection Panel marked a turning point for the World Bank, at a time when the notion of accountability in international financial institutions was still nascent. Triggered by people's movements, this bold experiment aimed at transparency faced hurdles as the Bank was immune to legal consequences, and over a while, it weakened the Panel's mandate. The 2019 US Supreme Court decision stripping the Bank of absolute immunity reshapes its accountability landscape. Post-immunity, the Panel gains renewed significance, scrutinizing and recommending actions. Legal repercussions for non-compliance bring a paradigm shift, compelling the Bank to enhance transparency, engage communities, …

"Use And Improve" Is My Accountability Mantra, Despite 30 Years Of Eye-Opening Disappointments, Natalie Bridgeman Fields

Perspectives

This essay finds justification for championing the continued existence, functioning and evolution of Independent Accountability Mechanisms (IAMs). An inside assessment of the thirty-year functioning of IAMs reveals that inadequate power and independence are severely hampering IAM efforts to hold actors accountable for harm. Simultaneously, IAMs can’t make progress without the underlying financial institutions reforming their incentive structures to reward harm prevention and remedy. Despite decades of systemic failure to deliver accountability, when exceptions happen, they are worth it and can be spectacular. With an influx of new climate-related funding expected at the financial institutions, exceptions need to become the rule. …

Between Disruption And Legitimation Of Development: A Critical Perspective On The Inspection Panel And A Call For More Radical Thinking Within The Accountability Community, Dustin Schäfer

Perspectives

The essay explores the Inspection Panel’s (the Panel) conflicting role of providing accountability for negatively affected people while facing political limitations. The Panel has proven its potential to disrupt harmful development practices. However, by reproducing “dev-speak” it also continuously contributes to legitimizing the same assumptions of “how to do development”, and thus to the continuation of harmful development practices. This ambivalent effect is inherent to the Panel because of its politically inhibited and depoliticized (i.e. technocratic) environment. To overcome this long-lasting and structural condition will require critical examination of the concept of development and the role it plays in …

Ending Violence In Development Finance Actions To Affirmatively Prevent And Stop Reprisals Against Rights Defenders, Gregory Berry

Perspectives

This Essay makes a case for stronger enforcement and implementation of zero-tolerance policies on reprisals within Development Finance Institutions. It argues that for DFIs to inculcate any hopeful vision of a just and inclusive transition to a sustainable future, they must begin by affirmatively cutting at the roots of reprisals. The essay particularly emphasizes two essential changes. First, Independent Accountability and Audit Mechanisms must be empowered to protect the safety of defenders by self-initiating investigations where there are credible concerns of reprisals, and by accepting anonymously submitted complaints. Second, DFIs must evolve to grow teeth for enforcing measures against retaliatory …

Reflections On The Role Of The Panel, Charles Di Leva

Perspectives

Over the past thirty years, the World Bank and the Inspection Panel have had a supportive relationship regarding the principle of accountability, particularly as applied to the field of development finance operations and the role and responsibility of the Bank as a multilateral public sector financial institution. This relationship has been apparent in at least three key aspects: i) following the Bank’s lead, many development institutions around the globe have taken steps to improve their own accountability and developed independent accountability mechanisms (IAMs) modeled on the Inspection Panel; ii) the Bank and other development institutions have been supporting the development …

Glass Half-Full Or Glass Half-Empty? Thirty Years Of Accountability At The Inspection Panel--The Impact Of Its Work And What The Data Tells Us, Ramanie Kunanayagam, Mark Goldsmith, Ibrahim James Pam, Serge Selwan, Richard Wyness, Ayako Kubodera, Camila Jorge Do Amarel, Rupes Dalai

Perspectives

“A stroke of a genius”, “a bold experiment in transparency and accountability that has worked to the benefit of all concerned”, “a precedent under international law”, and a “citizen-based accountability mechanism” are some of the ways in which close observers have described the World Bank Inspection Panel, which celebrated its thirtieth anniversary in 2023.

The Inspection Panel Early Years (An Inside Story), Eduardo G. Abbott

Perspectives

This retrospective analysis explores the establishment and evolution of the World Bank Inspection Panel, from the perspective of the Panel’s first executive secretary. The Perspective describes the initial expectations, challenges, and concerns faced by the first Panel members as they wrestled to operationalize an unprecedented institution. The Perspective documents the strategic actions the Panel took to safeguard its independence and ensure its accessibility to potential claimants. The Perspective concludes with a review of the Panel’s contemporary struggles for autonomy prompted by a restructuring of the Panel and the evolving landscape of accountability mechanisms within the World Bank Group.

The Critical Contribution Of Independent Accountability Mechanisms (Iams) To The Global Governance Paradigm, Owen Mcintyre

Perspectives

For several decades now, the environmental and social safeguard policies adopted by international financial institutions (IFIs), along with the related accountability frameworks provided by the independent accountability mechanisms (IAMs) established by each, have been at the very forefront of a global movement to extend good environmental and social governance values to the practice of international development finance. The complex of substantive and procedural standards of institutional conduct required under multilateral development bank (MDB) safeguard policies in respect of the assessment and implementation of bank-funded development projects or activities exemplifies the phenomenon of so-called “transnational” or “global” law - the rich …

Rethinking 'What Counts' As Accountability, Jonathan Fox

Perspectives

The current accountability impasse suggests it may be time to rethink core concepts, as well as the field’s underlying theories of change. The idea of accountability is malleable, ambiguous — and contested. This fuzziness poses challenges for both theory and practice – how do we know what strategies bolster accountability – or whether accountability produces its expected effects? This think piece recognizes the challenge of defining ‘what counts’ as accountability, unpacks a longstanding theory of change - that sunshine is the best disinfectant - and considers some information-based reform initiatives to identify missing links in the causal chain between transparency …

An Increased Normalization Of Iams Faces Ground Realities: Lack Of Transparency Impedes Access To Iams, Hamid Sharif

Perspectives

The creation of the Inspection Panel at the World Bank has led to the emergence of a norm that international financial institutions (IFIs) must hold themselves accountable to project-affected people through independent accountability mechanisms (IAMs). AIIB as a 21^st century bank reflects this normalization of IAMs. As a new MDB, AIIB’s charter mandates creation of an oversight body that includes the independent accountability mechanism or the Project-affected People’s mechanism (PPM). The PPM is aligned with many features of IFI’s IAMs while incorporating some innovations.

The central question asked by civil society and board members across IFIs is why there …

Regulatory Innovation And Permission To Fail: The Case Of Suptech, Hilary J. Allen

Scholarly Articles in Law Reviews & Journals

The recent U.S. Supreme Court decision West Virginia v. EPA has cast a pall over the discretion of administrative agencies at a very inopportune time. The private sector is currently adopting new technologies at a rapid pace, and as regulated industries become more technologically complex, administrative agencies must innovate technological tools of their own in order to keep up. Agencies will increasingly struggle to do their jobs without that innovation, but the private sector is afforded something that is both critical to the innovation process, and often denied to administrative agencies: “permission to fail.” Without some grace for the inevitable …

Three Decades Of Seeking Elusive Remedies, Richard E. Bissell

Perspectives

Remedy is a topic to be approached with some trepidation in the area of accountability. Throughout three decades of proliferating International Accountability Mechanisms ( IAMs), remedy has been the issue least addressed by leadership. Most management and board members find it threatening, wherever a remedial action falls on the spectrum, from an apology for error to financial compensation. The pursuit of remedy builds on the demonstrated existence of harm, which is embarrassing at the least, and brings a focus on consequences and actionable steps for those people whose lives have been damaged as well as for environmental violations. This short …

Defi: Shadow Banking 2.0?, Hilary J. Allen

Scholarly Articles in Law Reviews & Journals

The growth of so-called “shadow banking” was a significant contributor to the financial crisis of 2008, which had huge social costs that we still grapple with today. Our financial regulatory system still hasn’t fully figured out how to address the risks of the derivatives, securitizations, and money market mutual funds that comprised Shadow Banking 1.0, but we’re already facing the prospect o fShadow Banking 2.0in the form of decentralized finance, or “DeFi.” DeFi’s proponents speak of a future where sending money is as easy as sending a photograph–but money is not the same as a photograph. The stakes are much …

Beware The Proposed Us Crypto Regulation— It May Be A Trojan Horse, Hilary J. Allen

Popular Media

Following the spectacular failure of crypto exchange FTX International, there have been renewed calls for crypto legislation (including from the industry itself).But many of the proposals so far would be worse than the status quo — at least for the general public. Crypto firms such as FTX were involved in drafting many of the mooted US bills. The exchange’s implosion should not become a pretext for rushing these into law.

On The Misuse Of Regressions Of Price On The Hhi In Merger Review, Jonathan Baker

Scholarly Articles in Law Reviews & Journals

The article explains why regressions of price on HHI should not be used in merger review. Both price and HHI are equilibrium outcomes determined by demand, supply, and the factors that drive them. Thus, a regression of price on the HHI does not recover a causal effect that could inform the likely competitive effects of a merger. Nonetheless, economic theory is consistent with the legal presumption that a merger is likely to have adverse competitive effects if it occurs in a concentrated market and makes that market more concentrated.

Lawmaking Without Law: How Over Reliance On Economics Fails Financial Regulation (And What To Do About It), Steven L. Schwarcz, Theodore L. Leonhardt

American University Law Review

This Article examines a fundamental failure of process in lawmaking: the overreliance of lawmakers on economists and economic scholarship when designing and implementing financial regulation, to the virtual exclusion of lawyers and legal scholarship. This overreliance leads to regulation that often is based on theoretical models and assumptions that are poorly informed by experience and may not withstand real-world testing. The Article examines how to improve financial regulation by better integrating legal scholarship and lawyerly insights into the lawmaking process. Among other things, that will require law professors to gain the attention, and earn the respect, of lawmakers by writing …

Non-Debt And Non-Bank Financing For Home Purchase: Promises And Risks, Shelby D. Green

American University Business Law Review

No abstract provided.

Legal Issues In Tribal E-Commerce, Adam Crepelle

American University Business Law Review

No abstract provided.

Recent Law Reforms In Eu Sustainable Finance: Regulating Sustainability Risk And Sustainable Investments, Felix Mezzanotte

American University Business Law Review

Responding to increasingly degrading environmental and social conditions, the European Commission has fostered important legal and regulatory reforms to achieve sustainable finance objectives in Europe. However, these reforms are numerous, complex, and fast-paced. They have proved difficult to grasp and contextualize, while adding to the intricacies of an already highly sophisticated EU legal and regulatory regime. This Article outlines and examines such reforms with the purpose of providing necessary insights into the current state of EU law and regulation in the area of sustainable finance. The first part of the Article conceptualizes the meaning of sustainability risk and of sustainable …

Testimony Before The U.S. House Of Representatives Committee On Financial Services On “Addressing Climate As A Systemic Risk: The Need To Build Resilience Within Our Banking And Financial System” In June 2021, Hilary J. Allen

Legislative Testimony & Comments

No abstract provided.

Constructing The Yellow Brick Road: Preventing Discrimination In Financial Services Against The Lgbtq+ Community, Cyrus Mostaghim

Upper Level Writing Requirement Research Papers

The Lesbian, Gay, Bisexual, Transgender, Queer, and Questioning (“LGBTQ+”) community lacks explicit statutory protections from discrimination in financial services. After the Supreme Court held in Bostock that employment discrimination based on sexual orientation or gender identity was illegal, the Consumer Financial Protection Bureau (CFPB) issued an informal interpretive rule for the Equal Credit Opportunity Act (ECOA) and Regulation B that made discrimination in the access to credit based on sexual orientation or gender identity illegal. However, this paper argues that an informal interpretive rule is easily rescinded and does not provide sufficient protection. Thus, alternative action is needed to create …

The Complex Implications Of Fintech For Financial Inclusion, Heather Hughes

Scholarly Articles in Law Reviews & Journals

No abstract provided.