Banking Union under Construction: The Impact of Foreign Ownership and Domestic Bank Internationalization on European Union Member States’ Regulatory Preferences in Banking Supervision

What is the optimal scope of regulatory harmonization in European financial sector governance? I argue that the levels of foreign ownership and domestic bank internationalization are important determinants of the extent to which governments are prepared to endorse European solutions in banking supervision or prefer national ones. I test two hypotheses about the impact of foreign ownership and domestic bank internationalization on regulatory preferences. This article shows that being a host jurisdiction to foreign financial institutions constrains states’ ability to steer credit flows and tackle perceived threats to national financial stability. As a consequence, decision-makers seek to preserve some national regulatory autonomy. Especially during economic downturns, national supervisory authorities have strong incentives to pursue policies that minimize losses for domestic stakeholders and shift burdens to foreign ones

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

Disentangling derivatives: international policy reforms concerning central counterparties

After the 2008 financial crisis, international policy reforms were adopted on various aspects of derivatives markets, highlighting the need for precise and consistent rules. We examine the making of international rules concerning the resilience, recovery and resolution of central counterparties (CCPs), which form acritical global financial infrastructure. We argue that regulators played an important role in setting relatively precise and consistent international standards on CCPs over time. Facing common challenges, such as market fragmentation and interlinkages between issues, fostered a problem-solving approach in transgovernmental networks. We also identify the policy coordination tools used by regulators

Regime complexity and managing financial data streams: The orchestration of trade reporting for derivatives

International regime complexity has become a prominent feature of the global economy and world politics. The international governance of derivatives markets is a notable case of this phenomenon in finance because a variety of post-crisis rules have been issued by a multitude of international standard-setting bodies. By combining the regime complexity and orchestration frameworks, we explain the precision and scope of international standards for derivatives trade reporting. We show how a collective orchestrator (the Group of Twenty) and a hub intermediary (the Financial Stability Board) managed regime complexity through the orchestration of the available intermediaries. We also seek to refine the orchestration framework by explaining how the mechanism of issue de-linkage can be used to manage the partly diverging goals among states within the collective orchestrator. Our findings are relevant for the global regulation and governance of other policy areas characterized by a multiplicity of actors and interlinked issues, such as trade, energy, and environmental policy

For the Market, or 'For Our Friends'? The Politics of Banking Sector Legal Reform in the Post-Communist Region after 1989

This article analyzes the political processes that have shaped legal reform of the banking sector in the post-communist region. The article identifies two patterns of reform and examines hungary and bulgaria as examples of each pattern. The strategy for changing banking sector legislation and its implementation in hungary has been ‘reforming for the market,’ whereas the prevailing strategy in bulgaria until 1997 was ‘reforming for our friends.’ after 1997, bulgarian governments switched to ‘reforming for the market.’ i argue that this shift took place because of an important partisan change of the governing elites that reinforced the role of international actors and altered the elites’ relationship with important domestic stakeholders. The article shows that front-runners of banking reform in the region such as hungary introduced significant private ownership in the sector and, at the same time, the governing elites enhanced the state's regulatory capacity. By contrast, ‘partial reform’ regimes such as bulgaria until 1997 undertook limited and selective ownership change and the governing elites weakened the state's regulatory capacity, thus giving a boost to the already existing clientelism