Ten years after the overhaul of financial regulation started in the European Union (EU), the results appear mixed in terms of reinforcing financial stability: too big to fail banks have grown bigger, new asset bubbles have formed, and a preoccupation of numerous academics is not whether another crisis will take place but rather the origins of this crisis and the magnitude it will have. The European regulatory framework for banks, in particular prudential requirements, is failing to prevent the building-up of systemic risk. a number of scholars have highlighted the intense lobbying of the financial industry at the global and European level to explain watered down reforms since the last international financial crisis. This paper focuses upon the role of governments in the EU policy making process and argues that in order to understand the shortcomings of bank prudential requirements in the EU, we need to look for the presence of a pro-industry bias in the positions defended by national governments in the EU regulatory process. This, in turn, requires defining what the target —financial stability-enhancing legislation— would look like, and devise a way to measure the distance between that ideal point and the positions of governments and industry. After reviewing the literature on financial stability this paper offers a definition applied to bank prudential requirements that can serve as A benchmark. Then it moves to analyse, through quantitative text analysis, the position papers and statements submitted by national governments in the EU and industry representatives on initiatives related to bank prudential requirements since 2008.
