Banks and the False Dichotomy in the Comparative Political Economy of Finance

Abstract

The wide-ranging varieties of capitalism literature rests on a particular conception of banks and banking that, the authors argue, no longer reflects the reality of modern financial systems. They take advantage of the greater information regarding bank activities revealed by the financial crisis to consider the reality, across eight of the world's largest developed economies, of the financial power of banks to act as bulwarks against market forces. This article offers a market-based banking framework that transcends the bank-based/capital market–based dichotomy that dominates comparative political economy's consideration of financial systems and argues that future CPE research should focus on the activities of banks. By demonstrating how market-based banking increases market influences on the supply of credit, the authors highlight an underap-preciated source of financial market pressure on nonfinancial companies (NFCs) that can have a potential impact across the range of issues that the varieties of capitalism (VoC) literature has seen as differentiating national systems. This approach has implications in areas such as labor, welfare, innovation, and flexibility.

Internationalised banking, alternative banks and the Single Supervisory Mechanism

“…This paper contributes to three main bodies of scholarly literature. First, it adds to a small but growing political economy literature on financial systems -starting with Zysman's (1983) pioneering work, followed by Allen and Gale (2000), Busch (2009), Deeg (2010, Hardie and Howarth (2013) and Hardie et al (2013) which engage in a comparative analysis of financial (or specifically banking) systems. Second, the paper contributes to the (limited) comparative political economy literature on Varieties of Capitalism and the financial and sovereign debt crisis (Hall 2014) and specifically national banking systems and the recent crises (Hardie and Howarth 2013;Quaglia and Howarth 2013) by examining how the specific features of national banking systems can direct government preferences on both national and supranational financial regulation and supervisory frameworks.…”

“…First, it adds to a small but growing political economy literature on financial systems -starting with Zysman's (1983) pioneering work, followed by Allen and Gale (2000), Busch (2009), Deeg (2010, Hardie and Howarth (2013) and Hardie et al (2013) which engage in a comparative analysis of financial (or specifically banking) systems. Second, the paper contributes to the (limited) comparative political economy literature on Varieties of Capitalism and the financial and sovereign debt crisis (Hall 2014) and specifically national banking systems and the recent crises (Hardie and Howarth 2013;Quaglia and Howarth 2013) by examining how the specific features of national banking systems can direct government preferences on both national and supranational financial regulation and supervisory frameworks. Third, this paper contributes to the emerging literature on the politics and political economy of Banking Union (Donnelly 2014;Howarth andQuaglia 2013, 2014;Schimmelfennig 2014;Salines et al 2012, Spendzharova 2014) which feeds into the vast literature on EMU and European economic governance, more generally, and national preference formation on EMU, more specifically (for example, Dyson 2000; Dyson and Featherstone 1999;Verdun 2000;Walsh 2000).…”

The political economy of the euro area's sovereign debt crisis: introduction to the special issue of theReview of International Political Economy

“…Consequently, they identify a spectrum of market-based banking on which can be positioned banking systems with more or less market based assets and liabilities. This spectrum can be used to explain the differential impact of the international financial crisis across developed countries because those most affected by the crisis had banks with significant market-based assets and / or liabilities (Hardie and Howarth 2013). Countries, such as Italy and Spain, where banking was moderately market based, coped relatively well with the initial stage of the international financial crisis --although the collapse of securitisation markets hit Spanish bank lending given significant bank funding on wholesale markets.…”

“…Most of the 'old' literature on national financial systems (for example, Zysman 1983; and in financial economics, Allen and Gale 2000) as well as the 'new' literature (Hardie and Howarth 2013) do not investigate national financial systems in either Southern Europe or Central and Eastern Europe (on varieties on capitalism in Central and Eastern Europe, see Bohle and Greskovits 2012). One of the main distinctive features of Central and Eastern European banking systems is the predominance of foreign-owned institutions --rising to over 90 per cent of total bank assets held by foreign banks in Estonia, Slovakia and the Czech Republic.…”

Guest editorial

“…Although the storyline is about an alternative credit intermediation chain to help out SMEs, insiders are well aware, first, that the securitization part of the shadow banking universe serves mainly as a funding source for big banks and is hence anything but an alternative to bank lending (Hardie et al, 2013).…”