Global banks in national markets: a theory of post-crisis reform as democracies under constraint

Thesis

Why have global banks been subject to such varying regulatory reform since the Global Financial Crisis? Despite a far-reaching global regulatory regime, many states supplemented these multilateral efforts with their own unilateral interventions, a process that has led the Financial Stability Board to warn of a “global fragmentation of the financial system”. This thesis argues that these unilateral reforms of global banks are the outcome of democracy under constraint. In the wake of the Global Financial Crisis policymakers faced unprecedented popular outrage over the activities of large financial institutions. The increasing salience of this issue forced them to respond to the democratic pressure for reform. In many cases, this response was constrained not by elite capture, but by economic pressure. Many advanced democracies are highly dependent on the value that financial institutions create in global markets, which they extract as fiscal revenue. Therefore, the degree of reform they can impose is constrained by its potential negative effect on the global firms that are intertwined with their national economies. The higher the state’s dependency on global banks, the more constrained will be the democratic response. This theory of post-crisis reform as democracy under constraint is tested on regulatory outcomes in three democracies which in 2011 were home to just under half of the world’s global banks: Switzerland, the United Kingdom and the United States. Australia – which did not experience bank bailouts in 2008 – is incorporated as a shadow case. This theory of post-crisis reform challenges established models. These have focused mainly on relationships among institutional elites and have failed to provide a comprehensive explanation for varying national responses to the GFC. By identifying the democratic drivers behind the most significant post-GFC reforms of global banks, this thesis offers a new and plausible explanation for the diverse regulatory outcomes. If it can be ascertained that democracy is able to reform global finance even under powerful economic constraints, this broadens the policy terrain in which the rules of advanced capitalism can be contested.

Authors: Begg, HM

• DOI: 10.5287/ora-9egz4qmxy
• Type of award: DPhil
• Level of award: Doctoral
• Awarding institution: University of Oxford
• Language: English
• Keywords: financial regulation; public policy; comparative politics; democracy and capitalism; banking reform; financial crisis; comparative political economy
• Subjects: Comparative government; Legislative bodies; Banks and banking, Foreign; Politics and government; Economic policy; Financial crises