The Political Economy of Banking Regulation - Does the Basel 3 Accord Imply Change?

Financial stability is a public good. Banking regulation has a vital role to play in the provision and maintenance of financial stability. This article introduces a multiple identity approach to the regulation of the banking sector. It conceptualises bankers and regulators sharing a common social identity with the rest of the society, namely taxpayer identity besides their respective banker and regulator identities. The article underlines the balance between two social identities, and the reasons why bankers and regulators cannot achieve a balance between the two. Finally, motivated by the multiple identity approach on the political economy of banking regulation, the article discusses two major policy recommendations for regulatory design, at least, to partially address the multiple identity problem.

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The Political Economy of Banking Regulation, 1864–1933

The Journal of Economic History ◽

10.1017/s002205070002684x ◽

1982 ◽

Vol 42 (1) ◽

pp. 33-40 ◽

Cited By ~ 51

Author(s):

Eugene Nelson White

Keyword(s):

Political Economy ◽

Civil War ◽

Great Depression ◽

Banking Industry ◽

Banking Regulation ◽

The Political ◽

The Great Depression ◽

Banking Community ◽

Legal Constraints ◽

Powerful Group

The laws and regulations that shaped the structure of the banking industry from the Civil War to the Great Depression were strongly influenced by the banking community. In this period legal constraints on banks were weakened by competition between state and federal regulators trying to increase membership in their banking systems. The elimination of regulation was not completed, however, because the politically most powerful group in the industry, the unit banks, had an interest in preserving some regulations.

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Risk Management in China's State Banks - International Best Practice and the Political Economy of Regulation

Business and Politics ◽

10.2202/1469-3569.1221 ◽

2008 ◽

Vol 10 (1) ◽

pp. 1-29 ◽

Cited By ~ 10

Author(s):

Stefan Brehm

Keyword(s):

Political Economy ◽

Risk Management ◽

Financial Stability ◽

Best Practice ◽

Management Practices ◽

Banking Sector ◽

Banking Regulation ◽

General Level ◽

The Political ◽

Minority Shareholders

The modernization of the banking sector, and particularly the big four state owned commercial banks, has a top priority on the Chinese reform agenda. Three of the four state banks found foreign strategic investors as minority shareholders and domestic banks now face more competition from global players since the country's WTO commitments came fully into effect at the end of 2006. A comprehensive approach to reform aims at pushing China's state banks into the league of global leading financial institutions within a few years time. But is this aim feasible despite prevalent state dominance? To shed light on the role and impact of the state in promoting sound risk management practices this paper focuses on the political economy of law implementation. Two main conclusions are drawn: (1) the direction of action is significantly different from reform outcomes due to weak incentives to enforce respective policies and as a consequence non-performing loan accumulation continues; and (2) on a more general level banking regulation in China illustrates that a normative approach based on international best practice is insufficient to address the issue of financial stability in many emerging and developing countries because it neglects the role of the institutional embeddedness of banking reform.

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