Bank power and public policy since the financial crisis

Abstract

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.

Epistemic contestation and interagency conflict: The challenge of regulating investment funds

“…A third explanation would emphasize the power of the financial industry (Culpepper & Reinke, 2014; Macartney et al, 2020; Woll, 2014). For example, parts of the shadow banking sector—notably repo markets—wield “infrastructural power” owing to their importance for central bank monetary operations (Braun, 2020; Gabor, 2016), although this argument is less relevant to asset management.…”

Banks’ Structural Power and States’ Choices on What Structurally Matters: The Geo-Economic Foundations of State Priority toward Banking in France, Germany, and Spain

“…17 Multiple articles have shown how European national governments actively opposed this proposal and ultimately prevented it from passing. 18 This situation raises a particular puzzle. Specifically, large Eurozone banks are obviously powerful and have managed to continue growing despite a widespread consensus in the wake of the financial crisis that they should be broken up.…”

Having “Banks Play Along” Varieties of State-Bank Coordination and State-Guaranteed Credit Programs During the Covid-19 Crisis

“…This is true in Europe, where firms are financed mostly through bank credit, and this is especially true for small and medium enterprises (SMEs), which are the main targets of these programs. This aspect of the relationship between banks and states has been extensively examined by the recent scholarship on the structural power of banks in the context of post-crisis financial reforms (Moschella and Tsingou 2013;Culpepper and Reinke 2014;Culpepper 2015;Bell and Hindmoor 2017;Pagliari and Young 2017;Keller 2018;Macartney et al 2020). The literature in this area has shown how banks' unique capacity to threaten to dry-up the flows of liquidity to the economy puts them in a "privileged position" to influence or capture public officials and policymaking processes (Lindblom 1983).…”