Why European Diversity Prevents Regulatory Reform: Comparative Capitalisms and the Institutional Mediation of Structural Power

Despite great expectations, changes in post-crisis financial regulation have mostly been incremental rather than comprehensive. The scholarly literature largely explains this absence of more radical reform by emphasizing the structural power of finance: despite the increased salience of financial regulation after the crisis, financial groups successfully stopped reforms through public campaigns which linked their specific sectoral interests to broader societal goals. Yet this literature has difficulties accounting for cross-national variation in lobbying success. My contribution thus draws on the comparative capitalisms literature to show how business power is mediated institutionally. I argue that characteristics of a country’s financial system – specifically patterns of corporate funding – condition the appeal of lobbying campaigns which tie industry demands to the well-being of the economy. Empirically, I demonstrate how similar domestic pressures led to contrary positions of the British and German governments in European negotiations on banks’ capital requirements and the financial transactions tax.