Banking on burden reduction: how the global financial crisis shaped the political economy of banking regulation

Abstract

The Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA) of 1996 requires the Federal Financial Institutions Examination Council—an interagency council composed of US banking regulators—to conduct decennial retrospective reviews of existing banking regulations, with an emphasis on reducing regulatory burden. EGRPRA reviews provide a lens to study the political economy of banking regulation before and after the global financial crisis (GFC) of 2007–2009. Through comparative case studies of EGRPRA reviews in 2007 and 2017, this article documents how ex post impact assessment of banking regulation and stakeholder participation in banking regulatory processes have changed over the last 10 years. Using within-case process tracing and content analysis of an original dataset of government documents and public input, this article analyzes the extent to which changes in review processes, participation, and outcomes can be attributed to the policy shock of the GFC and/or shifting political, regulatory, and/or market contexts. The results suggest that government–market interactions have changed considerably since the GFC and that regulatory politics explain many of these changes. While retrospective review and stakeholder participation therein may enable more effective and legitimate regulations and rulemaking processes, much work remains to realize these potential benefits in banking regulation.