Banking Sector Liberalization and Reform in the Post-Communist Region after 1989: Assessing the Impact of Domestic Politics, International Conditionality, and Economic Development. IHS Political Science Series Paper No. 116, June 2008

This paper connects the literature on market liberalization in advanced industrialized countries and that on economic reform in transitional countries. It tests three important theoretical frameworks in the analysis of policy change—domestic politics, international pressures, and economic development—using time-series cross-section analysis of 25 post-communist states. The findings reveal a complex causal pattern where factors from all three theoretical frameworks are substantively important. On the domestic level, curbing corruption is strongly related to more banking sector liberalization. The higher the presence of foreign banks in the country, the more banking sector liberalization. On the international level, exposure to stricter IMF conditionality has a positive effect on the extent of banking sector liberalization. The analysis also confirms the salience of structural factors: Measures of economic development such as GDP per capita and stock market capitalization are important predictors of the extent of banking sector liberalization

The fall of Bulgaria’s government provides an opportunity to overcome the country’s persistent corruption problem

The Bulgarian parliament was dissolved on 6 August, with new elections being called for 5 October. As Aneta Spendzharova writes, one of the key precipitating factors in the Bulgarian government’s collapse was a scandal relating to one of the country’s largest banks. She argues that the banking crisis is indicative of wider corruption issues within Bulgaria and that the new elections will provide an opportunity for voters to break with the problems of the past

Banking sector liberalization and reform in the post-communist region after 1989: assessing the impact of domestic politics, international conditionality, and economic development

'Dieser Beitrag verbindet die Literatur zur Marktliberalisierung in fortgeschrittenen Industriestaaten mit derjenigen zur ökonomischen Reform in Transitionsländern. Dabei werden drei wesentliche theoretische Ansätze zur Untersuchung von politischen Reformprozessen auf der Grundlage einer kombinierten Quer- und Längsschnittuntersuchung von 25 postkommunistischen Staaten empirisch getestet - die Effekte nationaler politischer Prozesse, internationale Einflüsse und die Konsequenzen ökonomischer Entwicklungen. Die empirischen Befunde untermauern ein komplexes Verursachungsmuster, das wesentliche Effekte aller drei Argumente belegt. Auf der Ebene der nationalen Politiken tragen Erfolge im Kampf gegen Korruption zur Liberalisierung des Bankensektors bei. Je stärker ausländische Banken sich in einem Land engagieren, desto tiefgreifender wird dieser Sektor liberalisiert. Auf der internationalen Ebene trägt die strikte Konditionalität des IWF zur Liberalisierung des Bankensektors bei. Die Analyse bestätigt auch die Bedeutung struktureller Aspekte: Indikatoren der ökonomischen Entwicklung, etwa das BIP pro Kopf oder die Kapitalisierung der Aktienmärkte, sind wesentliche Einflussgrößen für die Liberalisierung des Bankensektors.' (Autorenreferat)'This paper connects the literature on market liberalization in advanced industrialized countries and that on economic reform in transitional countries. It tests three important theoretical frameworks in the analysis of policy change-domestic politics, international pressures, and economic development-using time-series cross-section analysis of 25 post-communist states. The findings reveal a complex causal pattern where factors from all three theoretical frameworks are substantively important. On the domestic level, curbing corruption is strongly related to more banking sector liberalization. The higher the presence of foreign banks in the country, the more banking sector liberalization. On the international level, exposure to stricter IMF conditionality has a positive effect on the extent of banking sector liberalization. The analysis also confirms the salience of structural factors: Measures of economic development such as GDP per capita and stock market capitalization are important predictors of the extent of banking sector liberalization.' (author's abstract)

Explaining the EU's Uneven Influence Across the International Regime Complex in Shadow Banking

This article shows that the EU has exerted uneven influence within the global regime complex in shadow banking. Why? We seek to explain the variation in the EU's ability to exert influence across different elemental regimes - those on hedge funds and securitization - in the broader regime complex over time. In hedge funds regulation, the EU has pursued more stringent international rules, to no avail. In securitization, the EU has been more successful in promoting more lenient regulation at the international level. We focus on the EU's internal cohesiveness (which can change over time) as the key explanatory variable

Regulators and the Quest for Coherence in Finance::The Case of Loss Absorbing Capacity for Banks

After the international financial crisis, new financial regulation was adopted at the international, regional and national levels, raising the issue of how to promote regulatory coherence, defined as the consistency between the rules adopted at different governance levels and in a variety of policy venues. A major recent area of reform concerned the loss absorbing capacity (LAC) of banks. In practice, the lack of regulatory coherence concerning LAC hampers the effective resolution of large international banks in a timely manner, ultimately undermining financial stability. We examine the role of regulators in the quest for coherence on LAC, explaining the incentives they had and how they deployed their delegated competences at different levels to achieve coherent rules that ensure financial stability. Theoretically, we combine insights from the public administration and political economy literatures. Methodologically, we process trace the making of LAC rules on three governance levels and in multiple policy venues

Get Your Money’s Worth from Investment Advice: Analysing the Clash over the Knowledge and Competence Requirements in the Markets in Financial Instruments Directive (MiFID II)

This special issue aims to examine whether there is an enduring politicization in the European Union (EU) “Better Regulation” agenda despite the emphasis on neutral evidence-based policy making. Our article addresses this overarching research question by focusing on the use of stakeholder consultations in the case of financial sector governance, particularly, the amended Markets in Financial Instruments Directive (MiFID II). We show that calibrating key provisions in MiFID II, such as those concerning knowledge and expertise, is not a simple exercise in rational problem definition and policy design. The provisions examined in this article have important repercussions for financial sector firms’ business strategies and operations. Thus, investment firms, banks, training institutes and public organizations have mobilized and actively sought to assert their views on the appropriate requirements for professional knowledge and experience in MiFID II. We found that, following the stakeholder consultation, the European Securities and Markets Authority (ESMA) opted for a minimum harmonization approach at the EU level. At the same time, ESMA also supported giving the respective national competent authorities sufficient remit to issue additional requirements in accordance with national laws and regulatory practices. Our article demonstrates that while public consultations provide rich evidence for the policy making process, they also contribute to the lasting politicization of regulatory decisions

The European Commission’s Expert Groups: Adapting to the Contestation of Expertise

Considering the growing contestation of expertise in the public sphere, this chapter explores the institutionalisation of expert groups and how the european commission (ec) has adapted its use of expertise. Drawing on established conceptualisations about the functions of expertise during the policy-making process, our analysis is two-fold. Firstly, we consider macro level changes and broader trends in the entire expert groups (egs) system. Secondly, we examine the micro level changes of expert advice use in two case studies. Based on new data from the commission’s register of egs, as well as on interviews, primary and secondary sources, we find improvements with regard to transparency, conceptualised as improved access to the register. The ec has also specified better the classification of different types of experts. Furthermore, the two case studies of egs—focusing on financial sustainability and lowering limits of industrial pollution—show that the use of expertise is both instrumental and strategic. Concretely, the strategic (consensus-building) use of expertise helped to narrow down the range of viewpoints. Eventually, this facilitated the identification of compromises and acceptable policy solutions in the policy shaping stage of the eu legislative process

Accountability in Post‐Crisis Eurozone Governance: The Tricky Case of the European Stability Mechanism

Established at the height of the Eurozone sovereign debt crisis, the intergovernmental European Stability Mechanism (ESM) has, potentially, considerable influence over decisions on the provision of loans to Eurozone member state governments and on the recapitalization of banks. Legally and organizationally, the ESM is an international financial institution and thus its accountability can be compared to that of the International Monetary Fund (IMF) and other international financial institutions. However, the ESM’s governance structure and decision-making procedures show that it is deeply embedded in the Eurozone governance architecture, resulting in a dual institutional embeddedness. Focusing on vertical and horizontal accountability combined with a learning perspective on accountability, this article presents an assessment of the accountability mechanisms applicable to the idiosyncratic ESM and how these mechanisms work in practice