Bank Politics: Structural Reform from a Comparative Perspective

Despite ‘Too Big To Fail’ banks being a major contributory factor in the 2008 crisis, we know surprisingly little about why governments pursued divergent approaches to tackling the problem. We address this by comparing the development (or not) of important bank structural reforms across six jurisdictions: the US, UK, EU, France, Germany, and Netherlands. Our research shows that while the US and UK were quick to implement stringent new restrictions on bank speculative activities, France and Germany only introduced limited changes, despite early commitments to structural reform – while no significant changes were enacted in the Netherlands or EU level. To explain this, we develop a new ‘comparative financial power’ framework based on two propositions: 1) industry is more effective at shaping regulatory reform when it unified and centralised; and 2) reforms are less politically contested when policy makers use venue shifting to specialist groups. This generates a typology of bank structural reform that we label durable reform (UK), contested reform (US), symbolic reform (France and Germany), and no reform (Netherlands and EU). We argue that the typology provides important new explanatory leverage to existing political economy scholarship, and could be deployed in areas beyond financial regulation.