Bank Structural Reform: A Comparative Financial Power Approach

When: 28 Feb 2022, 14:15-15:30
Where: Zoom
Speaker: David Howarth

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Meeting ID: 929 9594 9745


‘Too-big-to-fail’ banks were the defining regulatory issue of the 2008 financial crisis. But measures to address this by separating retail banking from higher risk trading activities – known as structural reform – proved politically divisive. This paper sets out to explain the resulting regulatory variation across five countries: the United States, United Kingdom, France, Germany, and the Netherlands. Challenging existing political economy and political science approaches, our paper develops a novel ‘comparative financial power’ framework to analyse how bank lobbying is mediated by two factors: first, whether financial power is cooperative or competitive; and second, policy makers’ use of institutional venue shifting. We argue that the US and UK governments implemented major reforms because the banking industry was divided and fragmented: but that venue shifting to an independent committee led to durable reform in the UK, while political polarisation in the US contributed to conflictual reform. By contrast, unified bank lobbying led the French and German governments to adopt limited symbolic reforms to appease political pressures to act; while the Dutch government was able to avoid reform by deflecting the issue through multiple commissions. Our paper concludes by reflecting on the applicability of the typology to other regulatory areas.

Paper on request.