Is resilience enough? The macroprudential reform agenda and the lack of smoothing of the cycle

After the financial crisis, central banks were entrusted with implementing an ambitious macroprudential reform agenda. The goal was arguably twofold: to increase the resilience of the financial system and to lower the amplitudes of the financial cycle. A decade later, the implementation of the agenda is characterized by the pursuit of measures to raise the resilience of the financial system, while tools to smoothen the cycle have been rather sidelined. To explain this difference in implementation efforts, the article combines ideational scholarship with the analytical stance of reputational theory and analyses the technocratic debate over macroprudential strategy among policy‐makers of the Fed, the Bank of England (BoE) and the European Central Bank (ECB). The article identifies reputational concerns linked to the need for discretionary interventions, the uncertain scientific status of the concept of the cycle and missing metrics as causes for concern, leading most central banks to shy away from forcefully implementing this policy goal.     

Regulators and the quest for coherence in finance: The case of loss absorbing capacity for banks

After the international financial crisis, new financial regulation was adopted at the international, regional and national levels, raising the issue of how to promote regulatory coherence, defined as the consistency between the rules adopted at different governance levels and in a variety of policy venues. A major recent area of reform concerned the loss absorbing capacity (LAC) of banks. In practice, the lack of regulatory coherence concerning LAC hampers the effective resolution of large international banks in a timely manner, ultimately undermining financial stability. We examine the role of regulators in the quest for coherence on LAC, explaining the incentives they had and how they deployed their delegated competences at different levels to achieve coherent rules that ensure financial stability. Theoretically, we combine insights from the public administration and political economy literatures. Methodologically, we process trace the making of LAC rules on three governance levels and in multiple policy venues.     

Diagnosing and Explaining the Global Financial Crisis: Central Banks, Epistemic Authority, and Sense Making

This article explores a key facet of the ideational dynamic underlying the politics of the global financial crisis, examining the interpretative and communicative practices through which the two most powerful central banks in the world—the Fed and the ECB—made sense of the events. Drawing on a constructivist neoinstitutional perspective, the study traces and analyzes the diagnoses and causal accounts of the global financial crisis formulated and voiced by these two actors, mapping and examining their evolution from the beginning of the events in the American subprime market in mid-2007 through the peak of the crisis in global financial markets in mid-2009. The analysis assesses the extent to which the two central banks diagnosed and explained the crisis in ways that challenged dominant notions and conceptual assumptions regarding the economic field, particularly the financial realm, or rather in ways that served to ratify them. While in the first stages of the crisis the diagnoses and causal accounts tended to ratify dominant notions and understandings of the financial field, they later evolved as involving a partial, but still significant, reassessment of established truths. These coherent and detailed sense-making plots touched upon some of the most basic attributes of global financial capitalism, carrying with them the potential for helping to open up the political space for a reevaluation of some of its ideational underpinnings.     

Adding rooms onto a house we love: Central banking after the global financial crisis

This article examines the extent to which central bankers have been willing and able to rethink their beliefs about monetary policy in the wake of the global financial crisis. We show that despite the upheaval, the core pre‐crisis monetary policy paradigm remains relatively intact: central bankers believe that they should primarily pursue price stability through targeting a low inflation rate in a transparent manner, and that they need operational independence in order to achieve this goal. In a bid to address post‐crisis conditions and maintain their credibility, however, central bankers have also layered new elements onto this paradigmatic core. We document both the resilience of pre‐crisis beliefs and the process of layering using computer‐assisted text analysis and qualitative analysis of 13,586 speeches given between 1997 and 2017 by central bankers from around the world.     

The Return of Political Risk: Foreign-Owned Banks in Emerging Europe

Political risk—risk that investments are damaged by policy action of authorities—increased during the financial crisis due to controversies about the distribution of accumulated losses among stakeholders. Authorities interconnected by cross-border banks considered unilateral policies that minimised losses for domestic stakeholders at the expense of their foreign counterparts. This is at odds both with the assumption behind financial integration which presumes multilateral responses to cross-border shocks and with the typical definition of political risks that ignores the fact that not only host-country, but also home-country authorities can create such risks. This paper recasts the definition of political risk and reviews instances when political risk materialised within the EU banking market between 2007 and 2011. The analysis reveals that the EU regulatory framework needs to be enhanced to contain resurgent political risks systematically rather than through ad hoc interventions of the EU and international bodies.     

The G‐20 Must Get Serious About Its Commitments

The sovereign debt problem in Europe, ignited by Greece, has morphed into an economic crisis challenging the solvency of major banks and countries as well as a generalized crisis of governance. Lacking the legitimacy of public support, the leaders of the European Union's fledgling institutions have been indecisive and unable to contain the looming danger of financial contagion. Along with the economic slowdown in the United States, instability and volatility in Europe threaten to derail the fragile global recovery. In this section, several former European leaders as well as political figures from the emerging economies offer their ideas on how to fix Europe and stem the global threat.     

How to Save Europe

The sovereign debt problem in Europe, ignited by Greece, has morphed into an economic crisis challenging the solvency of major banks and countries as well as a generalized crisis of governance. Lacking the legitimacy of public support, the leaders of the European Union's fledgling institutions have been indecisive and unable to contain the looming danger of financial contagion. Along with the economic slowdown in the United States, instability and volatility in Europe threaten to derail the fragile global recovery. In this section, several former European leaders as well as political figures from the emerging economies offer their ideas on how to fix Europe and stem the global threat.     

A Robust Vision of Europe

The sovereign debt problem in Europe, ignited by Greece, has morphed into an economic crisis challenging the solvency of major banks and countries as well as a generalized crisis of governance. Lacking the legitimacy of public support, the leaders of the European Union's fledgling institutions have been indecisive and unable to contain the looming danger of financial contagion. Along with the economic slowdown in the United States, instability and volatility in Europe threaten to derail the fragile global recovery. In this section, several former European leaders as well as political figures from the emerging economies offer their ideas on how to fix Europe and stem the global threat.     

Europe Faces Crisis Brazil Solved

The sovereign debt problem in Europe, ignited by Greece, has morphed into an economic crisis challenging the solvency of major banks and countries as well as a generalized crisis of governance. Lacking the legitimacy of public support, the leaders of the European Union's fledgling institutions have been indecisive and unable to contain the looming danger of financial contagion. Along with the economic slowdown in the United States, instability and volatility in Europe threaten to derail the fragile global recovery. In this section, several former European leaders as well as political figures from the emerging economies offer their ideas on how to fix Europe and stem the global threat.     

From China's “Peaceful Rise” to Building Communites of Interest

The sovereign debt problem in Europe, ignited by Greece, has morphed into an economic crisis challenging the solvency of major banks and countries as well as a generalized crisis of governance. Lacking the legitimacy of public support, the leaders of the European Union's fledgling institutions have been indecisive and unable to contain the looming danger of financial contagion. Along with the economic slowdown in the United States, instability and volatility in Europe threaten to derail the fragile global recovery. In this section, several former European leaders as well as political figures from the emerging economies offer their ideas on how to fix Europe and stem the global threat.     

Only Full Integration Can Save Europe

The sovereign debt problem in Europe, ignited by Greece, has morphed into an economic crisis challenging the solvency of major banks and countries as well as a generalized crisis of governance. Lacking the legitimacy of public support, the leaders of the European Union's fledgling institutions have been indecisive and unable to contain the looming danger of financial contagion. Along with the economic slowdown in the United States, instability and volatility in Europe threaten to derail the fragile global recovery. In this section, several former European leaders as well as political figures from the emerging economies offer their ideas on how to fix Europe and stem the global threat.     

REGULATORY OPPORTUNISM: CROSS‐NATIONAL PATTERNS IN NATIONAL BANKING REGULATORY RESPONSES FOLLOWING THE GLOBAL FINANCIAL CRISIS

The variation in national regulatory responses to the recent global financial crisis has been considerable. This article explores this variation using new data on conditions in 30 different OECD countries between 2009 and 2012. Using a mixed‐method approach which employs both fuzzy‐set qualitative comparative analysis and logistic regression, we test a number of hypotheses regarding regulatory response patterns in the banking sector. Our findings suggest that while state intervention during the financial crisis was a necessary condition for a significant regulatory response, ‘financialization’, operationalized here as the structural dominance of the financial sector in the economy, plays a more important role. We show that financialization is both a sufficient condition and a good predictor of a significant regulatory response, and point to possible causal explanations for this surprising pattern.     

Dynamics of Indonesian democratisation

Financial sector liberalisation has led to market failure on a massive scale. In industrial countries market failure led to the Great Financial Crisis that erupted in 2007 and continues into its fifth year. In developing countries liberalised financial markets have failed to provide access to financial services for the vast majority of households and firms. Small and medium-sized enterprises (smes), which are critical for employment, income creation and economic development, are particularly excluded by liberalised private financial markets. Market failure necessitates government intervention. To enhance smes' financial access requires an activist role by governments—not only by ensuring an enabling policy framework and financial infrastructure for smes, but also by supporting direct provision of financial services through national development banks and directed credit programmes. More broadly the crisis also provides an opening for a neo-structuralist development paradigm to replace the failed Washington Consensus. In this context activist financial sector policies should be integrated with industrial sector strategies.     

The Financial Crisis of the Local Authorities in Israel: A Resource-Based Analysis

The financial crisis affecting many of the local authorities in Israel has a significant influence on their ability to supply municipal services of an appropriate amount and quality. So far, studies have been addressed to the financial crisis from a political approach by discussing aspects such as the problematic interrelation between central and local governments together with resource allocation. In this paper we investigate the financial crisis of many local authorities in Israel from a strategic point of view. However, this is by no means to argue that other approaches such as institutional and political ones are not important. Rather, the paper investigates whether the financial crisis affecting many Israeli local authorities is a result of their own strategies and practices.
Specifically, we have used the resource-based approach to explore the nature of their joint crises and the potential strategic responses that the local authorities should adopt in order to move into a more favourable state. In particular, we examine three resource-based systems: customer-oriented, organizational culture, and human resources, as the strategic roots of this crisis. We also examine the way they could produce a sustainable competitive advantage and could lead local authorities from the present position to a better one. The article recommends that the heads of local authorities should move to a resource-based strategy in order to perform both more efficiently and effectively.     

Bank regulatory authority in China

In China the regulation of credit and capital is conducted by the banking system. Originally this system was highly centralized under the direct control the Ministry of Finance. More recently, as the Ministry of Finance has become busier with additional responsibilities such as the management of an increasingly complex tax system, and the banking system has gained its independence.

For the banks, this reorganization not only represents an increase in authority and status, it also makes possible an increased effectiveness in carrying out existing regulatory responsibilities. The need for increased effectiveness becomes evident on review of the role that the banks have played in Chinese society prior to the 1985 reforms. Without the means to enforce their authority, the banks could not be as influential in regulating the economy as had been intended.

Because they have been provided with enforcement regulations, the banks can now influence not only the provision of credit and currency but also the management of group and individual businesses and organizations throughout China. As the communist party stepping back from law and policy enforcement, the banks are partially filling the vacuum.     

Globalization and economic disparities in East and Southeast Asia: New dilemmas

The once high-performing East Asian economies were suddenly rocked by the 1997 financial crisis. This raised the question of whether the crisis signals the end of the 'Asian development model' and provides further evidence of the 'globalization of poverty'. This article attempts to answer this question by examining the connection between liberalization (and deregulation) and the pattern of poverty reduction and income inequalities in four East and Southeast Asian economies severly affected by the late 1990s crisis. Based on the findings, it contests the view that globalization means the end of the role of the state. Instead, it is argued that, while some states are playing the role of promoters of the globalization process, others are redefining and resisting globalization. The crisis also has drawn attention to a possible third policy option, which would involve the revitalization of the regulatory role of the state, greater attention to social issues and a more national approach to economic management.     

Mayoral scalar strategies and the role of the central state after the financial crisis

Much has been written about state rescaling, politics of scale and the rise of cities and regions in Europe. Little is known, however, about the impact of the financial crisis on these processes. By taking the view of city mayors, this paper presents a comprehensive and timely re-evaluation of central tenets of this literature in the turbulent aftermath of the financial crisis. The analysis shows the variegated pathways of state rescaling before and after the financial crisis, the multifaceted scalar strategies with which mayors have responded in different countries and cities, and the impact of such strategies on their perception of a centralisation towards the national state. The paper concludes by emphasising the continued dominance of the central state, whereas potentials for the rise of cities are rather to be sought at subnational than at European or global scales.     

The Politics of Finance: How Capital Sways African Central Banks

While there is a large literature on the politics of central banking its insights are difficult to translate to sub-Saharan Africa. This article addresses gaps in this literature by considering how the interests of those who control financial resources sway African central banks. Case studies of Kenya, Nigeria and Uganda demonstrate that variation in the sources of capital on which countries rely to finance investment helps to account for the pattern of variation in central bank policy stances. The analysis further develops and probes arguments about power derived from the control of capital in the context of developing countries.     

Corporate governance reform: the case of Korea

Due partly to the expectations of foreign investors, the reform of corporate governance following the 1997 financial crisis has largely been in line with the Anglo-American outsider model at the expense of Korea's traditional insider model. The increased role of the (equity) market vis-à-vis banks and shareholder activism, NGOs and foreign investors has helped to constrain ‘tunnelling’ by controlling shareholders. While the complicated ownership structures have yet to be resolved, the governance paradigm of chaebols has gradually changed from one dominated by family or controlling shareholders to a system in which the power of professional managers and monitoring of markets have increased substantially.     

Avoiding crisis contagion: Poland’s case

This paper examines the major reasons for limited crisis contagion to Poland in the period 2007–09. At this time Poland was the only European Union (EU) member that grew in the midst of the Great Recession and financial crisis. The following analysis focuses on domestic polices and economics structure which made this growth possible. Poland’s modest levels of private and public debt, low share of mortgages in bank assets, limited decline in real estate prices, and proactive policies by domestic and foreign banks substantially buffered Poland’s financial sector. At the same time, real economy was aided by a high share of domestic consumption as opposed to exports, a favorable labor market structure, and timely financial assistance from the EU, all that shielded it from major crisis contagion.