Death in Veneto? European banking union and the structural power of large banks

Abstract

We argue that the evolving preferences and power resources of large cross-border banks help explain the crucial political moves to European banking union. As they became larger and more European, the relative dependence of these banks on national regulators declined even as the dependence of states on these banks increasedresulting in a net rise in the structural power of large banks. These banks benefited from the supranationalization of supervision through reduced compliance costs and the effective opening of European markets. The political divergence in the interests of large international banks and small national ones eventually caused the German and the French governments' change of position in intergovernmental bargaining. Once in place, banking union accelerated balance sheet consolidation to the benefit of large banks that took over their weaker competitors.

Stillborn Banking Union: Explaining Ineffective European Union Bank Resolution Rules†

“…Our liberal intergovernmentalist analysis aligns with a number of other studies which point to messy Franco‐German compromises on the core elements of Banking Union (Schild, 2018) and thus deficiencies in the design of Banking Union (Mayes, 2018; Goodhart and Avgouleas, 2019). Our analysis supports claims made by a number of scholars pointing to the importance of banking system structures in shaping government preferences on both the building blocks and core elements of Banking Union (Howarth and Quaglia, 2016) and to the immense power of banks in shaping national preferences and the outcomes on Banking Union (Culpepper and Tesche, 2020). Moreover, like the ‘failing forward’ thesis (Jones et al ., 2016), we demonstrate the deficiencies of Banking Union which are only likely to be addressed – and only in part – in the context of a future systemic banking crisis and worsening public debt situation in which the capacity of national governments to bail‐out banks is sorely tested.…”

“…Second, our liberal intergovernmentalist analysis contributes to the literature on German and French preferences on EU economic governance and on Banking Union in particular (Schäfer, 2016; Schild, 2018). By rooting national government preferences in the defence of powerful banking interests, our argument parallels but does not rely upon studies emphasizing the power of big banks in the move to and design of Banking Union (Culpepper and Tesche, 2020).…”

European Banking Union to the Rescue? How Supranational Institutions Influenced Crisis Management in Italy

“…Most of the literature on national capitalist systems is usually characterised by 'methodological nationalism'(Callaghan 2010) because it often does not fully investigate the implications of EU institution-building and policy-making for domestic actors. By contrast, our research sheds light on the potentially profound consequences that supranational institutional developments exert on the evolution of national capitalist traditions (see alsoCulpepper & Tesche 2019; Farrell & Newmann 2015). In the case under investigation, for instance, the establishment of Banking Union reshaped long-term relationships between the Italian public authorities and the banks and among the banks themselves.…”

Political Science Research on the Reasons for the (non) Adoption and (non) Implementation of EMU Reform Proposals: The State of the Art

“…This lens sheds light on how government preferences are influenced by national models of capitalism and related domestic banking structures and policy legacies (Massoc 2019, Spendzharova 2014), but also how market actors' power plays out in the policy process. Taking into account the types of power (structural, instrumental) regulated industry holds in the banking sector is, for instance, a useful perspective to grasp the role of big banks in the EBU's functioning (Culpepper and Tesche 2020). Mapping actors' political and European capital and their network relations can explain why certain reform proposals have failed (Georgakakis and Rowell 2013b, a).…”