Leveraged interests: Financial industry power and the role of private sector coalitions

Abstract

This is the accepted version of the paper.This version of the publication may differ from the final published version. DRAFT Abstract The power of financial industry groups is a subject of widespread academic and public debate. Existing international political economy (IPE) research has highlighted how different resources, institutions and structural features allow financial industry groups to influence financial regulatory policymaking. In so doing, however, this literature routinely tends to neglect the wider array of interest groups beyond the particular financial industry groups being regulated. Actor plurality is usually assumed to be low or inconsequential. Such an assumption obscures the important role that actor plurality may play in the policymaking process. We present new quantitative and qualitative evidence demonstrating how global financial regulatory politics is more plural than most existing depictions would suggest. Actor plurality can have significant effects in 'leveraging' the influence of financial industry groups which are often able to tie their interests with those of other private sector groups affected indirectly by the regulation in question. We illustrate this underappreciated facet of financial industry power through a variety of case-based evidence from the formation of banking and derivatives rules in various jurisdictions, both before and after the The recent global financial crisis has contributed to a resurgence of interest in financial sector industry groups such as banks, credit rating agencies, and hedge funds, and the influence these groups and their associations exercise over the shape of contemporary financial regulation. Permanent repository linkConjectures regarding the power of these groups are widespread within the international political economy (IPE) literature, and numerous authors have debated how different resources, institutions and structural features of contemporary economies enable financial industry groups to influence the regulations to which they are subject.Such attempts by IPE scholars to explain the power and influence of the financial industry on regulatory outcomes have traditionally concentrated their analysis on a rather narrow set of financial sector actors. An implicit, and often untested, assumption informing most of the literature is that collective action problems, resource and information asymmetries, and exclusionary institutional contexts constrain the plurality of actors involved in the financial regulatory policymaking process. As a result, most depictions represent the financial regulatory domain as a very non-plural place, dominated by a few all-powerful financial industry groups influencing regulation they are subject to at will, while other non-financial actors have been assumed away and left absent from most analyses.Contrary to this perspective, in this article we contend that the mobilization of a plurality of private sector groups both inside and outside of the financial sector is a key characteristic of the financial regulatory poli...

The interest ecology of financial regulation: interest group plurality in the design of financial regulatory policies

“…This finding thus supports the notion within the literature that technical complexity is a complementary aspect of financial industry power (McPhilemy, 2013;Lall, 2015;McCarty, 2013). In demonstrating the variability of mobilized dissent our findings complement recent interventions on the theme of regulatory capture and financial hegemony which suggest that finance has been subject to greater challenge since the global financial crisis (Kastner, 2014;Clapp & Helleiner, 2012;Pagliari & Young, 2014;Young, 2012;Helleiner & Thistlethwaite, 2013). Our empirical evidence suggests that we should expect to find financial regulatory policymaking processes to be less dominated by the regulated financial industry when regulation is generated after the global financial crisis, is relatively non-complex and is situated away from transnational policymaking fora.…”

“…a bank in the case of a banking regulation) -from financial industries which are not the 'targets' of regulation (e.g. an insurance company in the context of a bank regulation), and business groups who are outside of the financial sector altogether (for a similar approach see Pagliari and Young 2014;Rasmussen and Carroll 2013). 12…”

“…Many have lamented in this context how the involvement of civil society organizations has been sporadic and weak when it comes to financial regulation (Scholte, 2013;Helleiner & Porter, 2010;Mügge, 2010, p. 9;Mooslechner, Schuberth, & Weber, 2006), and the lack of countervailing forces has reinforced the "unchecked might of global finance" (Anheier, 2014). Such depictions of the financial regulatory policymaking environment has not remained uncontested, as a variety of case studies have highlighted how financial industry groups have been facing opposition from outside as well as within the financial industry since the crisis (Kastner, 2014;Clapp & Helleiner, 2012;Pagliari & Young, 2014;Young, 2012;Helleiner & Thistlethwaite, 2013). These and other observations have called into question what McKeen-Edwards and Porter (2013) call the "unified dominance model" of financial regulatory politics.…”

“…4 It might be argued that the mobilization of interest groups within the financial regulatory consultation process is only secondary to other factors that ex ante shape the regulatory agenda in favor of the financial industry, such as dominant norms or the structural power of the financial industry. While we acknowledge that we can only observe mobilized responses to regulatory policies that are already on the agenda, it is widely acknowledged within the literature that interest group plurality space plays an important role in influencing the design and implementation of regulatory policies (Halpin & Grant, 2012) and in constraining financial industry influence (Kastner, 2014;Woll, 2013;Pagliari & Young, 2014). Even recent interventions on the 'structural power' of the financial industry suggest that industry's mobilization efforts can be seen in a complementary way to their prominence and agenda-setting powers (Culpepper & Reinke, 2014;.…”

“…These conditions are however not fixed: the interest group environment in financial regulatory policymaking may be dynamic and changing. For instance, different empirical studies have documented how the regulated financial industry has occasionally been constrained by the opposition faced different groups -for example by NGOs and other non-business groups (Clapp & Helleiner, 2012;Kastner, 2014), as well as other business groups inside and outside the financial industry (Mügge, 2006;Young, 2012;Pagliari & Young, 2014).…”