Asymmetric influence in global banking regulation

Abstract

Global regulatory standard setting is one of the most lucrative battlefields of the international political economy. Asymmetric influence and regulatory capture in setting such standards can undermine the regulation of economic activity, with negative externalities for the society. Scholars of International Political Economy, and of global finance in particular, are in the process of revealing the mechanisms underlying such regulatory capture and failure. I contribute to this analysis with an empirical evaluation of the mechanisms underlying influence in setting such standards. I assess the influence of nine different national, transnational, and international actors in the case of global banking regulation (the Basel II framework of the Basel Committee on Banking Supervision). On the basis of a quantitative–qualitative assessment, I develop integration and rejection rates to measure influence in global regulation. My findings reveal that the key dynamic in setting global standards is the simultaneous influence of national (competition state) coalitions of politicians and firms as well as transnational harmonization coalitions of transnationally active firms and regulators. The results provide a basis for a new argument to understand regulatory capture and failure.