Epistemic contestation and interagency conflict: The challenge of regulating investment funds

Abstract

Scholarship on regulating global finance emphasizes the importance of national and bureaucratic interests, but less attention has been devoted to epistemic sources of regulatory conflict. We address this by analyzing the failure of regulators to agree tougher rules for large investment funds after the 2008 crisis. The article suggests this outcome was the result of epistemic contestation between prudential regulators and securities regulators, rooted in divergent interpretive “frames.” We show that US and EU prudential regulators pushed for entity‐based regulation of investment funds by escalating the issue to global standard‐setting bodies. But this was successfully resisted by securities regulators that exercised epistemic authority through recursive practices—appeals to expertise, jurisdictional claims, and alliance building—to defend their transaction‐based approach. The article demonstrates how an interpretivist perspective can provide new insights into inter‐agency conflict and regulatory disputes in other policy fields.

Asset manager capitalism: An introduction to its political economy and economic geography

“…Being represented by such high-profile former central bankers certainly constitutes an asset in regulatory battles. When global regulators debated whether the largest asset managers should, alongside their peers in global banking, be designated ‘systemically important’ – which would have brought them under a more stringent regulatory regime, the EU investment fund industry was, in the words of one insider interviewed by James and Quaglia (2023: 354), ‘‘very vocal’ in lobbying national and EU securities regulators to “pass the message on to central banks”’. In the end, asset managers successfully prevented being classified as global systemically important financial institutions.…”

Why are international standards not set? Explaining “weak” cases in shadow banking regulation

“…We expect that where the preferences of different global regulatory bodies are aligned, agreement on international standards is more likely; conversely, where there is conflict between regulatory bodies, standards are less likely. Recent scholarship on regulatory conflict finds that transgovernmental disagreement can arise as a consequence of clashes over jurisdictional mandates and policy competencies (Bach et al 2016;Busuioc 2016;Lombardi and Moschella 2017), as well as contrasting regulatory ideas and approaches James and Quaglia 2022;Kranke 2020). It follows that technocratic conflict over international standards is more likely where a range of sectoral regulatory bodies are involved (for example, see Gabor 2016;Knaack and Gruin 2020).…”

Professional ecologies in European sustainable finance

“…Those recognized for their scientific excellence and command of abstract knowledge can also fend off the politicization of issues and keep their framing as apolitical, including on ethically charged issues (Littoz‐Monnet, 2020). Making issue treatments highly technical empowers particular experts while limiting policy alternatives (Brugger & Engebretsen, 2022; James & Quaglia, 2022). Those esteemed as part of the core of the expert community are able to induce deference in others, while those perceived as fragile will decline in status (Merton, 1988).…”