Hostname: page-component-78c5997874-xbtfd Total loading time: 0 Render date: 2024-11-13T03:32:57.922Z Has data issue: false hasContentIssue false
  • English
  • Français

To change banks or bankers? Systemic political (in)action and post-crisis banking reform in the UK and the Netherlands

Published online by Cambridge University Press:  17 January 2020

Joseph Ganderson Open the ORCID record for Joseph Ganderson [Opens in a new window]
Get access Rights & Permissions [Opens in a new window]

Abstract

After the subprime financial crisis, the countries who were worst affected set about reforming legacy financial regulations. Given multiple similarities in the way they experienced the crisis and the similar complexions of their post-crisis economies and politics, the contrast between the UK and the Netherlands' approaches to breaking up their largest banks presents a puzzle for prevailing theories in the politics of financial regulation. Both countries explored a range of reform options using similar expert committees, but while UK policymakers determined that commercial and investment operations should be ring-fenced in the largest British banks, the Dutch reform program centered on the banks’ own recommendations to change banking culture from the bottom up by developing a code of conduct and banker's oath. The paper traces this divergence to two related effects produced by the countries’ contrasting majoritarian and consensus party systems: power sharing and coalition formation. Under conditions of high issue salience, both worked to encourage British policymakers to prioritize reform, while in the Netherlands each factor reduced party political responsiveness and de-emphasized alternatives to the banks’ own reform prescriptions. The paper ultimately suggests that institutional democratic variables are worthy of greater recognition among scholars of business power and financial regulation.

Keywords

bank structural reformfinancial regulationindependent commission on bankingparty systemsbusiness power
Type
Research Article
Information
Business and Politics , Volume 22 , Special Issue 1: Ten Years of Regulatory Reform Since the International Financial Crisis: Understanding Bank Influence in the European and International Context , March 2020 , pp. 196 - 223
Copyright
Copyright © V.K. Aggarwal 2020 and published under exclusive license to Cambridge University Press

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Admati, Anat, and Hellwig, Martin. 2014. The Bankers’ New Clothes: What's Wrong with Banking and What to Do about It. Princeton, NJ: Princeton University Press.CrossRefGoogle Scholar
Allen, Franklin, Carletti, Elena, and Gu, Xian. 2015. “The Roles of Banks in Financial Systems.” In The Oxford Handbook of Banking, edited by Berger, Allen N., Molyneux, Philip, and Wilson, John O.S., 2nd ed., 27–46. Oxford: Oxford University Press.Google Scholar
Allen, Franklin, and Gale, Douglas. 2001. Comparing Financial Systems. Cambridge, MA: MIT Press.Google Scholar
Baker, Andrew. 2010. “Restraining Regulatory Capture? Anglo-America, Crisis Politics and Trajectories of Change in Global Financial Governance.” International Affairs 86 (3): 647–63.CrossRefGoogle Scholar
Barth, James R., Dan Brumbaugh, R., and Wilcox, James A.. 2000. “Policy Watch: The Repeal of Glass-Steagall and the Advent of Broad Banking.” Journal of Economic Perspectives 14 (2): 191–204.CrossRefGoogle Scholar
Beck, Thorsten, Demirgüç-Kunt, Asli, Levine, Ross, Cihak, Martin, and Feyen, Erik H.B.. 2018. “Financial Structure Database.” Text/HTML. World Bank. 2018. http://www.worldbank.org/en/publication/gfdr/data/financial-structure-database.Google Scholar
Bell, Stephen, and Hindmoor, Andrew. 2017. “Structural Power and the Politics of Bank Capital Regulation in the United Kingdom.” Political Studies 65 (1): 103–21.CrossRefGoogle Scholar
Bernhagen, Patrick. 2007. The Political Power of Business: Structure and Information in Public Policymaking. Routledge Research in Comparative Politics 21. London: Routledge.Google Scholar
Bernhagen, Patrick, and Bräuninger, Thomas. 2005. “Structural Power and Public Policy: A Signaling Model of Business Lobbying in Democratic Capitalism.” Political Studies 53 (1): 43–64.CrossRefGoogle Scholar
Blais, A., and Carty, R. K.. 1987. “The Impact of Electoral Formulae on the Creation of Majority Governments.” Electoral Studies 6 (3): 209–18.CrossRefGoogle Scholar
Block, Fred L. 1977. The Origins of International Economic Disorder: A Study of United States International Monetary Policy from World War II to the Present. Berkeley, CA: University of California Press.Google Scholar
Broz, J. Lawrence. 2013. “Partisan Financial Cycles.” In Politics in the New Hard Times: The Great Recession in Comparative Perspective, edited by Lake, David A. and Kahler, Miles, 75–101. Ithaca, NY: Cornell University Press.Google Scholar
Buiter, Willem H. 2009. “Lessons from the Global Financial Crisis for Regulators and Supervisors.” LSE Discussion Paper. http://eprints.lse.ac.uk/29048/.Google Scholar
Butzbach, Olivier. 2016. “Systemic Risk, Macro-Prudential Regulation and Organizational Diversity in Banking.” Policy and Society 35 (3): 239–51. https://doi.org/10.1016/j.polsoc.2016.09.002.CrossRefGoogle Scholar
Caprio, Gerard. 2009. “Financial Regulation in a Changing World: Lessons from the Recent Crisis.” Department of Economics Working Paper 2009–05. Department of Economics, Williams College. https://ideas.repec.org/p/wil/wileco/2009-05.html.Google Scholar
Chang, Michele, and Jones, Erik. 2013. “Belgium and the Netherlands: Impatient Capital.” In Market-Based Banking and the International Financial Crisis, edited by Hardie, Iain and Howarth, David, 79–102. Oxford: Oxford University Press. http://www.oxfordscholarship.com.ezproxy.eui.eu/view/10.1093/acprof:oso/9780199662289.001.0001/acprof-9780199662289-chapter-4.CrossRefGoogle Scholar
Conservative Party. 2010. “Invitation to Join the Government of Britain - The Conservative Party Manifesto.” https://www.conservatives.com/~/media/Files/Manifesto2010.Google Scholar
Crawford, Corinne. 2011. “The Repeal of the Glass- Steagall Act And The Current Financial Crisis.” Journal of Business & Economics Research 9 (1): 127–33.Google Scholar
Cruijsen, Carin van der, de Haan, Jakob, and Jansen, David-Jan. 2013. “Trust and Financial Crisis Experiences.” De Nederlandse Bank Working Paper ID 2319324. Amsterdam: Social Science Research Network. https://papers.ssrn.com/abstract=2319324.CrossRefGoogle Scholar
Culpepper, Pepper D. 2010. Quiet Politics and Business Power: Corporate Control in Europe and Japan. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Culpepper, Pepper D. 2015. “Structural Power and Political Science in the Post-Crisis Era.” Business and Politics 17 (3): 391–409.CrossRefGoogle Scholar
Culpepper, Pepper D., and Reinke, Raphael. 2014. “Structural Power and Bank Bailouts in the United Kingdom and the United States.” Politics & Society 42 (4): 427–54.CrossRefGoogle Scholar
De Wit, Jan. 2010. “Eindrapport van de Parlementaire Enquête Financieel Stelsel.” Den Haag: Tweede Kamer. https://www.parlementairemonitor.nl/9353000/1/j9vvij5epmj1ey0/viykic4m8azk.Google Scholar
Demirgüç-Kunt, Asli, and Huizinga, Harry. 2013. “Are Banks Too Big to Fail or Too Big to Save? International Evidence from Equity Prices and CDS Spreads.” Journal of Banking & Finance 37 (3): 875–94.CrossRefGoogle Scholar
Engelen, Ewald, and Konings, Martin. 2010. “Financial Capitalism Resurgent: Comparative Institutionalism and the Challenges of Financialization.” In The Oxford Handbook of Comparative Institutional Analysis, edited by Morgan, Glenn, Campbell, John, Crouch, Colin, Pedersen, Ove Kaj, and Whitley, Richard, 601–24. Oxford: Oxford University Press.Google Scholar
European Parliament. 2010. “Credit Lost - Summary in English.” Brussels: European Parliament. http://www.europarl.europa.eu/meetdocs/2009_2014/documents/cris/dv/credit_lost_/credit_lost_en.pdf.Google Scholar
Factiva. 2018. “Factiva Global Database.” Dow Jones Factiva. http://factiva.com/sources/factivasearch/index_cs.aspx.Google Scholar
FBC. 2010. “Future of Banking Commission - The Full Report.” London: Which? Magazine. https://about-which.s3.amazonaws.com/policy/media/documents/59b0044f48870-future-of-banking-commission-report-445249.pdf.Google Scholar
FSB. 2011. “Policy Measures to Address Systemically Important Financial Institutions.” Financial Stability Board. 2011. http://www.fsb.org/2011/11/r_111104bb/.Google Scholar
George, Alexander L., and Bennett, Andrew. 2005. Case Studies and Theory Development in the Social Sciences. BCSIA Studies in International Security. Cambridge, MA: MIT Press.Google Scholar
Gerschenkron, Alexander. 1979. Economic Backwardness in Historical Perspective: A Book of Essays. Cambridge: Belknap Press.Google Scholar
Hacker, Jacob S., and Pierson, Paul. 2014. “After the “Master Theory”: Downs, Schattschneider, and the Rebirth of Policy-Focused Analysis.” Perspectives on Politics 12 (3): 643–62.CrossRefGoogle Scholar
Hardie, Iain, and Howarth, David. 2013. Market-based banking and the international financial crisis. Oxford: Oxford University Press.CrossRefGoogle Scholar
Hardie, Iain, and Macartney, Huw. 2016. “EU Ring-Fencing and the Defence of Too-Big-to-Fail Banks.” West European Politics 39 (3): 503–25. https://doi.org/10.1080/01402382.2016.1143240.CrossRefGoogle Scholar
Hay, Colin. 1999. The Political Economy of New Labour. 1st ed.London: Abe Books.Google Scholar
Holsteyn, Joop J. M. van. 2011. “The Dutch Parliamentary Election of 2010.” West European Politics 34 (2): 412–19.CrossRefGoogle Scholar
House of Commons. 2009. “Banking Crisis: Dealing with the Failure of the UK Banks.” London: House of Commons Treasury Committee. https://publications.parliament.uk/pa/cm200809/cmselect/cmtreasy/416/416.pdf.Google Scholar
Howarth, D., and James, S.. 2020. “The politics of bank structural reform: Business power and agenda setting in the United Kingdom, France, and Germany.” Business and Politics this issue.Google Scholar
Howarth, David, and Quaglia, Lucia. 2016a. “The Comparative Political Economy of Basel III in Europe.” Policy and Society 35 (3): 205–14.CrossRefGoogle Scholar
Howarth, David, and Quaglia, Lucia. 2016b. The Political Economy of European Banking Union. Oxford: Oxford University Press.CrossRefGoogle Scholar
Independent Commission on Banking. 2011a. “Final Report: Recommendations.” Independent Commission on Banking. London: Independent Commission on Banking. http://webarchive.nationalarchives.gov.uk/20131003105424/https:/hmt-sanctions.s3.amazonaws.com/icb%20final%20report/icb%2520final%2520report%5B1%5D.pdf.Google Scholar
Independent Commission on Banking. 2011b. “Interim Report: Consultation on Reform Options.” Independent Commission on Banking. London: Independent Commission on Banking. https://s3-eu-west-1.amazonaws.com/htcdn/Interim-Report-110411.pdf.Google Scholar
James, Scott. 2017. “The Structural-Informational Power of Business: Credibility, Signalling and the UK Banking Reform Process.” Journal of European Public Policy 11 (0): 1629–47.Google Scholar
Johnson, Simon, and Kwak, James. 2011. 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown. New York: Vintage Books.Google Scholar
Kara, Gazi I. 2016. “Bank Capital Regulations around the World: What Explains the Differences?” Oxford Law Faculty, November. https://www.law.ox.ac.uk/business-law-blog/blog/2016/11/bank-capital-regulations-around-world-what-explains-differences.CrossRefGoogle Scholar
Konishi, Masaru. 2002. “Bond Underwriting by Banks and Conflicts of Interest: Evidence from Japan during the Pre-War Period.” Journal of Banking & Finance 26 (4): 767–93.CrossRefGoogle Scholar
Party, Labour. 2010. “The Labour Party Manifesto - 2010.” http://www.cpa.org.uk/cpa_documents/TheLabourPartyManifesto-2010.pdf.Google Scholar
Lall, Ranjit. 2012. “From Failure to Failure: The Politics of International Banking Regulation.” Review of International Political Economy 19 (4): 609–38.CrossRefGoogle Scholar
Lehmann, Matthias. 2016. “Volcker Rule, Ring-Fencing or Separation of Bank Activities–Comparison of Structural Reform Acts around the World.” Journal of Banking Regulation 17 (3): 176–87.CrossRefGoogle Scholar
Levine, Ross. 1999. Bank-Based and Market-Based Financial Systems: Cross-Country Comparisons. Policy Research Working Papers. The World Bank.CrossRefGoogle Scholar
Levine, Ross. 2012. “The Governance of Financial Regulation: Reform Lessons from the Recent Crisis.” International Review of Finance 12 (1): 39–56.CrossRefGoogle Scholar
Liberal Democrats. 2010. “Liberal Democrat Manifesto - 2010.” Politics Resources. 2010. http://www.politicsresources.net/area/uk/ge10/man/parties/libdem_manifesto_2010.pdf.Google Scholar
Lijphart, Arend. 2012. Patterns of Democracy: Government Forms and Performance in Thirty-Six Countries. New Haven, CT: Yale University Press.Google Scholar
Lindblom, Charles E. 1977. Politics and Markets: The World's Political Economic Systems. New York: Basic Books.Google Scholar
Lindblom, Charles E. 1982. “The Market as Prison.” The Journal of Politics 44 (2): 324–36.CrossRefGoogle Scholar
Loonen, Tom, and Rutgers, Mark R.. 2017. “Swearing to Be a Good Banker: Perceptions of the Obligatory Banker's Oath in the Netherlands.” Journal of Banking Regulation 18 (1): 28–47.CrossRefGoogle Scholar
Maas, Cees, Eijffinger, Sylvester, van den Goorbergh, Wim, and de Swann, Tom. 2009. “Naar Herstel van Vertrouwen.” Den Haag. https://www.dekamer.be/kvvcr/pdf_sections/comm/common/asset.pdf.Google Scholar
Massoc, Elsa. 2020. “Banks, power, and political institutions: the divergent priorities of European states towards ‘too-big-to-fail’ banks: The cases of competition in retail banking and the banking structural reform.” Business and Politics this issue.Google Scholar
Mattli, Walter, and Woods, Ngaire (eds.). 2009. The Politics of Global Regulation. Princeton, NJ: Princeton University Press.CrossRefGoogle Scholar
Mitchell, Christopher. 2016. Saving the Market from Itself: The Politics of Financial Intervention. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Navidi, Sandra, and Roubini, Nouriel. 2017. Superhubs: How the Financial Elite and Their Networks Rule Our World. Boston: Nicholas Brealey Publishing.Google Scholar
NVB 2010. “NVB-Reactie Rapport Commissie De Wit,” 2010. http://old.findinet.nl/bedrijfsvoering/crisis/nvb_de_wit100510.htm.Google Scholar
Pagliari, Stefano, and Young, Kevin. 2016. “The Interest Ecology of Financial Regulation: Interest Group Plurality in the Design of Financial Regulatory Policies.” Socio-Economic Review 14 (2): 309–37.CrossRefGoogle Scholar
Powell, G. Bingham. 2000. Elections as Instruments of Democracy: Majoritarian and Proportional Visions. New Haven, CT: Yale University Press.Google Scholar
Reuters. 2010. “StanChart: Reasons for Keeping London HQ Weakening,” 4 August 2010. https://in.reuters.com/article/idINIndia-50628120100804.Google Scholar
Rickard, Stephanie J. 2017. “Electoral Systems and Policy Outcomes.” Oxford Research Encyclopedia of Politics. DOI: https://doi.org/10.1093/acrefore/9780190228637.013.267.CrossRefGoogle Scholar
Rogowski, Ronald, and Kayser, Mark Andreas. 2002. “Majoritarian Electoral Systems and Consumer Power: Price-Level Evidence from the OECD Countries.” American Journal of Political Science 46 (3): 526–39.CrossRefGoogle Scholar
SNL Database. 2018. “SNL Global Market Intelligence Database.” SNL - Standard & Poor's. https://www.spglobal.com/marketintelligence/en/.Google Scholar
Stigler, George. 1971. “The Theory of Economic Regulation.” Bell Journal of Economics 2 (1): 3–21.CrossRefGoogle Scholar
Stolz, Stéphanie Marie, and Wedow, Michael. 2013. “Keeping Banks Afloat: Public Lifelines during the Financial Crisis.” International Economics and Economic Policy 10 (1): 81–126.CrossRefGoogle Scholar
Tyrie, Andrew. 2015. The Poodle Bites Back: Select Committees and the Revival of Parliament. London: Centre for Policy Studies.Google Scholar
Vogel, David J. 1996. “The Study of Business and Politics.” California Management Review 38 (3): 146–65.CrossRefGoogle Scholar
Wijffels, Herman. 2013. “Naar een Dienstbaar en Stabiel Bankwezen.” Den Haag: Rijksoverheid. https://www.vno-ncw.nl/sites/default/files/downloadables_vno/Rapport_Commissie_Structuur_Nederlandse_Banken_0.pdf.Google Scholar
Woll, Cornelia. 2014. The Power of Inaction: Bank Bailouts in Comparison. Cornell Studies in Political Economy. Ithaca, NY: Cornell University Press.CrossRefGoogle Scholar
Young, Kevin. 2015. “Not by Structure Alone: Power, Prominence, and Agency in American Finance.” Business and Politics 17 (3): 443–72.CrossRefGoogle Scholar
Young, Kevin A., Banerjee, Tarun, and Schwartz, Michael. 2018. “Capital Strikes as a Corporate Political Strategy: The Structural Power of Business in the Obama Era.” Politics & Society 46 (1): 3–28.CrossRefGoogle Scholar
Young, Kevin L. 2012. “Transnational Regulatory Capture? An Empirical Examination of the Transnational Lobbying of the Basel Committee on Banking Supervision.” Review of International Political Economy 19 (4): 663–88.CrossRefGoogle Scholar
Zysman, John. 1983. Governments, Markets, and Growth: Financial Systems and Politics of Industrial Change. Ithica, NY: Cornell University Press.Google Scholar