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Law as a Pillar of Financial Stability: International Standards, Cooperation and the Public and Private Law Nexus
May 26, 2026
It is a great honor to join you to celebrate UNIDROIT’s centenary.
For one hundred years, UNIDROIT has helped shape the legal foundations of global commerce by advancing the harmonization and modernization of private law across jurisdictions. From its Principles of International Commercial Contracts to its work on secured transactions, insolvency and more recently digital assets, UNIDROIT has consistently pushed the frontiers of legal development.
And this work resonates deeply with the mandate of the International Monetary Fund. Safeguarding the stability of the international monetary system depends not only on sound macroeconomic policies, but also on the strength, clarity and predictability of legal frameworks. Clear and enforceable rules on contracts, collateral and insolvency are not technical details - they underpin how markets function. By strengthening these foundations, UNIDROIT has made a lasting contribution to financial stability.
On behalf of the IMF, let me extend our warmest congratulations on this remarkable milestone!
We meet at a moment of significant strain for the global economy. Resilience is once again being tested by high public debt, tighter financial conditions, persistent inflation, geopolitical fragmentation and now economic shocks from the war in the Middle East.
At the same time, risks are evolving. They are no longer confined to the banking sector. In many emerging markets, large cross-border portfolio flows are increasingly intermediated by nonbank financial institutions (NBFIs), whose vulnerabilities are becoming more visible and more consequential.
These issues were front and center at last month’s IMF-World Bank Spring Meetings. And the message was clear: sustaining resilience requires strong macro-economic frameworks anchored in sound legal foundations and supported by credible, well-sequenced policies.
This brings me to the central question of this conference: how can the law support financial stability in a more complex and fragmented world?
Let me offer three observations.
First, international standards matter, but implementation gives them force.
Over the past decades, international standards have expanded steadily from banking supervision and resolution regimes to deposit insurance, AML/CFT, and now crypto assets.
These standards provide a common language. They enable cooperation, reduce fragmentation and create a shared foundation for action across jurisdictions.
Many of them are “soft law” but their impact is anything but soft. In a fragmented world, where binding agreements are harder to achieve, soft law flexibility while promoting convergence, guiding countries toward common principles and best practices.
But standards matter only if they are effectively implemented. When they are, they shape behavior, anchor reforms, strengthen market confidence and support financial stability.
This is where collaboration becomes critical.
At the IMF, through the standards and codes initiative, we support the development and implementation of international standards across twelve key areas including banking supervision and insolvency.
Through the Financial Sector Assessment Programs (FSAPs), we conduct an in-depth assessment of countries’ financial systems, assessing not only risks, but also the legal, institutional, and supervisory frameworks that underpin them.
Critically, FSAPs are not merely diagnostic – they are catalysts for reform. For example, recent assessments have highlighted governance gaps in resolution regimes, including unclear financial stability mandates, weak legal protections, and limits on operational independence. Addressing those gaps early makes a real difference.
FSAP findings feed directly into the IMF’s broader work including lending, surveillance and capacity development, helping drive concrete reforms. And for countries with systemically important financial sectors, FSAPS are mandatory, making them a core pillar of global financial stability monitoring.
This is how standards translate into impact: through sustained collaboration among international institutions, policy makers, the private sector and other stakeholders, especially vital in a fragmented world.
Second, the law must keep pace with innovation.
Technological change is testing the limits of existing legal frameworks.
Consider crypto assets. They raise fundamental questions: How should they be legally classified? What rights do holders have? And how do we address risks to monetary sovereignty, payment system stability, and financial integrity?
Or take artificial intelligence. It is already transforming financial systems. Many central banks and supervisors are using AI to enhance risk monitoring and oversight. Yet it also introduces new risks from cyber vulnerabilities and concentration to questions about accountability, explainability and due process.
The challenge is clear: how do we capture the benefits of innovation while preserving legal certainty and safeguards?
Here again, UNDROIT plays a critical role. Its Principles on Digital Assets and Private Law, adopted in 2023, illustrate how soft law can respond with agility, providing clarity and guidance while legislation catches up.
At the IMF, we complement these efforts through legal analysis, policy advice and technical assistance, helping countries align their legal frameworks with international standards in a rapidly evolving landscape.
Third, robust private rights are essential to financial stability.
Financial systems run on legal certainty. Contracts must be enforceable. Creditors rights must be clear. Insolvency and resolution regimes must function effectively.
When these foundations are strong, markets operate with confidence and losses are allocated in an orderly, predictable way. When they are weak, uncertainty rises, resolution is delayed, and institutional failures can quickly become systemic.
This is not theoretical. Unclear property rights over custodied assets, weak segregation rules or uncertain creditor hierarchy can undermine trust, drain liquidity and amplify instability.
These issues are particularly acute for NBFIs which grow in size and systemic importance. Their resilience depends not only on regulations, but also on the legal frameworks that underpin their operations and resolution.
And underpinning all of this is the rule of law. None of these frameworks can function without courts that enforce laws predictably, timely, and impartially.
At its core, financial stability depends on the interplay between regulatory frameworks and private law foundations. This is precisely where UNIDROIT’s contribution is indispensable.
Financial markets are global, but legal systems remain national. UNIDROIT helps bridge that gap by bringing public and private law communities together, fostering dialogue, and strengthening the legal architecture that supports well-functioning global financial markets.
Collaboration among all stakeholders is not optional – it is essential. We all have a role to play, and progress depends on how well we connect these efforts and how we translate principles into practice. The partnership between UNIDROIT and the IMF is a strong example of what this can achieve.
Let me close with a simple reflection. In the 19th century, the expansion of cross border trade exposed a fundamental challenge: legal uncertainty across jurisdictions. UNIDROIT was later created to help address this challenge through greater harmonization.
Today the challenges are more complex and the stakes even higher. That makes UNIDROIT’s mission more important than ever.
Congratulations once again. And we at the IMF look forward to building on this partnership for the next hundred years.
© 2026 International Monetary Fund. All rights reserved.
