Framing International Finance and Its Regulation : The Pioneering Experience of the Euromarkets

Recent controversies over international finance have underlined the obscurity of financial offshore transactions. The opacity that surrounds international finance raises several issues ranging from the display and understanding of its territorial and legal nature, to questions relative to the usages and the legitimacy of practices actively deployed by myriads of perplexing and sometimes secretive actors. While the study of offshore as an umbrella for a wide range of economic transactions that fall out of the realm of regulation or taxation is still quite peripheral in academia (Palan, 2006) a specific market, the Euromarket, has attracted growing attention from academics. It is both considered as one of the most dramatic financial innovations of the post-war period (Schenk, 1998) and as the quintessential foundation of contemporary offshore finance (Roberts, 1994; Strange, 1991).

             Traditional approaches to the birth and development of the Euromarkets and offshore disregard the calculative foundations of the market. However, since statistics and accounting lie at the heart of financial practice and its regulation, issues regarding the measure of finance are key to opening the black box of offshore finance. Indeed, financial measures and metrics are necessary conditions to both the constitution of calculation spaces and the stabilization of practices. Academic inquiry into their inner workings is hence necessary to understand the processes that institute financial practices into markets and their regulatory implications.

            The post-war period is characterised by the definition of the accounting contours of national economies (Vanoli, 2002) and the progressive liberalization of capital flows which allowed for the boom, in the early 1960s, of innovative international financial practices of which the Euromarkets were the epitome. The debates surrounding the Euromarkets between 1958 and 1965 can be understood in terms of trials of explicitness (Muniesa & Linhardt, 2010) where potential regulators strived to stabilise and frame new financial practices with the intention of unlocking a new repertoire of regulatory action or surveillance. The Bank for International Settlements (BIS), as a potential regulator in matters of international finance, developed new statistical apparatuses in order to represent, stabilise, measure and regulate the emerging international financial order. The initial intention of the sitting members of the Committee of Experts on the Eurodollar of the BIS, all of whom came from leading European central banks, was to both qualify and quantify the Euromarkets by resorting to accounting and statistical methods. Through this process of clarification, they actively sought to stabilise and frame the market by agreeing on common concepts and definitions. However, after several years of following up and discussion, the BIS and its experts found themselves unable to reach up to their expectations, be it because of technical shortcomings, the difficulty of reaching consensus over definitions or even the unwillingness of some representatives to regulate the market. The outcome of this trial of explicitness surrounding the Euromarkets was both the effective offshoring and a regulatory abstention from central banks and the BIS towards the market. The result was that the Euromarkets were mainly left to private initiative.