Campus Tilburg University hoogleraren

Promotie S. Ruhela

Datum: Tijd: 14:00 Locatie: Aula

Multi-level Banking Regulatory Landscape: Crisis & Opportunities to Lobby for Trade Associations

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Samenvatting (in het Engels)

Units prefer to work collectively and in groups. Units of humans working together create synergy and division of labour whilst ensuring safety and protection. This is, perhaps, one of our most consequential discoveries. Pursuing objectives by working collectively and sharing responsibilities has enabled us to leave nomadic life behind and lay the roots of modern civilisation. Needless to say, this discovery has been systemically applied to institutions and structures created in almost every facet of the modern economy globally.

Since the dawn of minted paper money, banks have occupied the centre-stage in a nation’s economy. We no longer live in a world where a few wealthy goldsmiths or merchants function as a bank for travellers and traders. In the neoliberal world of the twenty-first century, private and semi-private banks have become commonplace. Banking transactions have become increasingly creative and complex. The increasing complexity can be partly attributed to the advent of cross-border transactions, open borders and globalisation in the last century, the expansion of the role of and services provided by banks. Thus, banks become a member of associations to speak collectively on common issues, organise common interests efficiently, and service and protect each other.

Business or trade associations that represent the interests of banks emerged in the twentieth century and have been on a fascinating journey ever since. From merely providing a platform for banks for various purposes, trade associations became powerful advocacy and lobby groups. In the last five decades, trade associations have become a focal point of collective interests of banks and financial firms. Trade associations have been the preferred intermediary between the private sector in banking and finance and regulators. Trade associations have become an important body that advocates and lobbies for the banks in international and domestic policy and regulatory circles.

Banks and trade associations that represent the interests of banks came under scrutiny in the aftermath of the Financial Crisis of 2007-08. A prominent criticism asserted that excessive lobbying by these non-state actors led to the adoption of weaker regulations that failed to maintain financial stability and prevent the erosion of wealth. Despite these criticisms, it has been observed that trade associations have continued to stay relevant for their stakeholders, especially regulators. Therefore, this dissertation embarks upon a quest to decipher the reasons that have led to trade associations occupying such privileged positions despite the challenges posed by crises that occurred.

This dissertation discusses the impact of the Financial Crisis of 2007-08 on the regulatory landscape under which banks and trade associations operate. This research inquires whether the banking regulatory landscape creates incentives for trade associations to pursue their objectives continually. Further, this work studies the trade associations' characteristics, and the decisions they take that allow them to pursue their objectives continually.

This dissertation concludes that the banking regulatory landscape generates demand for engagement by trade associations. Additionally, this research finds that certain trade associations can keep up with this demand by changing their internal characteristics, governance and manner of operating and/ or by adopting certain strategies.

The novelty and the contribution of this research lie in the interdisciplinary approach adopted by the dissertation towards understanding forces that enable, lead to and allow non-state actors, particularly trade associations, to pursue their objectives continually and, as a result, remain relevant continually for its stakeholders including regulators engaged in rule-making. This dissertation brings together theoretical literature from political economy, organisational and management studies, transnational regulatory networks, and transnational private rule-making to comprehend the privileged position enjoyed by trade associations.

The research is conducted as a two-part case study; the first undertakes a study of the regulatory banking landscape and incentives or opportunities for trade associations to engage with the regulators (both before and after the Crisis). The second case study is the analysis of a set of trade associations and their internal characteristics and decisions or strategies adopted by them to enable their continued relevance for the regulators. The impact of the Financial Crisis of 2007-08 is explored for both sets of case studies. The research is conducted by relying on primary and secondary sources. Officials occupying key positions in the regulatory bodies and trade associations are interviewed to provide insights that have not been reported before. Therefore, this dissertation accords an opportunity to develop a more nuanced understanding of the implications of the regulatory landscape in banking.