POLITICAL PRESSURES, ORGANIZATIONAL IDENTITY, AND ATTENTION TO TASKS: ILLUSTRATIONS FROM PRE‐CRISIS FINANCIAL REGULATION

Abstract

Regulatory agencies, like most public organizations, typically operate with multiple tasks and goals, which requires them to prioritize some tasks over others. Such prioritization, while essential, engenders a risk of bureaucratic oversight of significant material problems. Despite the ubiquity and importance of these concerns, our understanding of agencies' allocation of attention across tasks is limited. This article develops a model of agencies' allocation of attention across tasks, which involves an interaction between external public and political pressures and agencies' distinct organizational identities. A brief comparison between two cases of pre‐crisis financial regulation illustrates the proposed model. The two cases suggest that the British Financial Services Authority's and the Israeli Supervisor of Banks' distinct identities conditioned their responses to similarly vigorous pressures to devote more attention to firms' alleged mistreatment of their customers, with important implications for these regulators' attention to firms' capitalization and liquidity.