FERMiers required: applying watershed governance to banking and finance

Abstract

This paper conceptualizes financial markets as virtual environments which should be subject to stewardship requirements found in natural environments. As in natural environments, irresponsible self-governance and lax or off-target regulation result in environmental damage and social loss. Watershed governance is proposed as the best-fitting analogy to financial markets governance for seven reasons: 1, scaling the watershed analogy from small to large fits well with financial markets; 2, both consist of a variety of users who 3, tap hydrologic [capital] resources for many different uses. 4, financial markets, like watersheds, are made up of private, club, common pool and public goods, and 5, may be better-managed through polycentric institutions with a range of public-private governance arrangements. 6, governmental, private sector and mixed agents seek to support and manage [sustainable] exploitation in each. 7, environmental degradation comparisons are robust. Upstream-downstream interlinkage and cross-border riparian negotiations in combination with financial market cases illustrate challenging financial market governance issues.

Keywords

• banking and financial governance
• environmentally responsible management
• pollution haven
• polycentric governance
• property rights
• riparian systems
• watershed management