Despite much commentary in the media and the popular assumption that the banking industry exerts undue influence on government policy-making, the academic literature on the role of the banks since the 2008 financial crisis remains theoretically and empirically under-specified. In particular, we argue that different forms of financial power are often conflated, while favorable policy outcomes are too-readily assumed to be evidence of regulatory capture. In short, we still know relatively little about how bank influence varies over time and in different national contexts, the extent to which banking interests are unified or divided, and the conditions under which banks are capable of producing meaningful variation in policy outcomes. This article has three objectives: 1) to explain why the debate on bank influence matters; 2) to examine the evidence of bank influence since the international financial crisis; and 3) to set out a range of conceptual tools for thinking about bank power.

Following the financial crisis, the United Kingdom introduced major structural reforms to address concern about Too-Big-To-Fail (TBTF) banks, while France and Germany adopted much weaker reforms. This is puzzling given the presence of large universal banks engaged in market making activities in all three countries, which suffered significant losses during the international financial crisis, and given the commitments to reform made by political leaders in all three countries. The paper explains this policy divergence by analysing how dynamics of agenda setting contributed to the emergence of policy windows on structural reform. We explain the United Kingdom's decision to delegate the process to an independent commission as an example of venue shifting which helped to insulate the process from industry framing, and resulted in “conflict expansion” by mobilizing a wider coalition of actors in support of bank ringfencing. By contrast, in France and Germany the agenda was tightly managed through existing institutional venues, enabling industry to resist the framing of the issue around TBTF and limiting the role of non-business groups—a process we label as “conflict contraction.” We argue that analysis of agenda setting dynamics provides new insights into the cross-national variability of business power.

This paper examines the determinants of financial industry actors’ regulatory preferences—examining why some financial industry actors prefer less stringent financial regulations while others prefer more stringent regulations. The determination of preferences, we argue, can be understood as mutually dependent. How an organization is connected to other organisations through network ties may help to explain its regulatory preferences. Our empirical point of focus is financial industry lobbying in the context of the European Union (EU). Using data from nearly nine hundred lobbying letters related to legislation on banking, insurance, and securities regulation, we map out a “socialization network” that models connections between financial industry firms, their associations, as well as a broad range of other organisations and actors that are auxiliary to this community of organizations. Using these data we find evidence that organizations’ preferences are informed by their location within this socialization network. Controlling for a range of other plausible factors, we find that 1) those connected via common associational ties, 2) those closer to one another in the network and 3) those more “embedded” in this network are all less likely to diverge in terms of their preferences from one another.

According to most of the literature available so far, international and European cross-border banks and investments firms are considered the primary beneficiaries of the CMU and related revitalization of securitization. Nevertheless, an in-depth analysis of the transnational financial industry lobbying and influence, in the light of the final agreement on the securitization reform package, is still missing. This paper intends to fill this gap in the story by assessing if, and to what extent, the alleged industry beneficiaries played an active role in shaping the regulatory agenda within the CMU project and its related outcomes. An in-depth analysis of corporate lobbying in the securitization reform is thus provided, by looking at the interactions between structural and political contextual factors in shaping private/public coalitions along the different stages of the EU policy-making process. As it is argued here, the policy entrepreneurship of the European securitization industry has been the key factor to explain the emergence of the EU regulatory approach and its legislative outcomes.

Following the 2007–9 financial crisis, the EU strengthened its institutional apparatus for bank regulation, creating a trio of sectoral bodies, including the European Banking Authority (EBA). Various aspects of this new system have been studied, but to date, little is known about how banks engage with their new supranational regulator. We argue that such engagement fosters an interdependence between banks and regulators, thus contributing to the efficiency and robustness of the overall regulatory regime; but also that it is contingent on the regulator exhibiting the qualities of credibility, legitimacy, and transparency. These qualities are grounded in the domestic regulatory governance literature, but we suggest that they are rendered problematic by the complexities of the EU's multilevel system and, in particular, the overlap in competences between the EBA and the European Central Bank. We examine the EBA in the light of these criteria and find that banks’ engagement remains pitched towards established national regulators and the EU's legislative arena. This poses concerns for the efficacy of agency governance in the EU's regulatory regime for banking.

This article examines how two dynamics, one global and one domestic, have interacted to shape the politics of banking in Europe. In the aftermath of the 2008 crisis, European governments were subject to renewed structural incentive to promote TBTF banks: in financialized economies, the growth of these banks is perceived as an essential element of a national economy's global competitiveness. Yet, this incentive was subject to enhanced political contention at home. Factions—often led by actors from within the state itself—have opposed governments’ impetus to promote TBTF banks. The specific identity, preferences and resources of these factions are determined by distinctive political institutions and vary across countries. Through the comparative analysis of banking structural reform and banking competition policies in the UK, France and Germany, I argue that varieties of regulatory outcomes are explained by the differentiated institutional capacity of “anti-TBTF” factions to carry weight in policymaking processes across jurisdictions.

This article contributes to our understanding of how and why developing countries would comply with international banking regulatory standards, Basel standards. The article demonstrates the interplay between opportunity structures constituted by transnationalization of public policymaking and domestic institutional setting, and how forces of compliance resonate in the domestic politics of compliance. The empirical findings are based on Turkey's compliance with Basel standards. It relies on fieldwork that involves semi-structured qualitative interviews with senior regulators and bankers, which are complemented with analysis of secondary data. The article shows that a capable and willing regulator could capitalize on the top-down policymaking style which restricts the regulatee's access to international negotiations, and sets the terms at the domestic level. Direct access to international negotiations, resource asymmetry in favor of the regulator, and superior “negotiation knowledge” helped the regulator pacify a critical, skeptical regulatee, and drive the compliance process. The article also shows that the compliance process takes place at three stages: policy formulation at the international level, an “interpretation stage” in between the international and the domestic levels, and finally the domestic policy process.

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.

After the global financial crisis of 2007–9, policymakers hailed macroprudential policy as the solution to financial markets’ boom-bust patterns. Financial regulations would have to operate countercyclically, increasing in stringency during a boom while becoming lenient in a bust. Simultaneously, the procyclical effects of pre-crisis rules would have to be eliminated. Actual reforms, however, do not live up to these high hopes. In addition to the countercyclical policy framework's limited scope and ambition, its open-endedness is particularly striking. As policymakers have not specified when supervisors should (de)activate what instruments and how firms should measure risk, there is an inbuilt indeterminacy at macroprudential policy's core. I argue that obstacles inherent to the nature of systemic risk are key to understanding this policy outcome. As the financial system is reflexive, adaptive, and complex, there are hard limits to supervisors’ ability to “read” the financial cycle. Furthermore, as macroprudential policy itself becomes “part of financial markets,” countercyclical interventions may have systemically significant unintended consequences. This article empirically shows how policymakers at the global and EU level, confronted with these measurement and mitigation problems, ultimately opted for a limited and open-ended policy framework.