The domestic sources and power dynamics of regulatory networks: evidence from the financial stability forum

Abstract

ABSTRACTRegulatory networks are key elements of the global economy, but little is known about their variation. Why do some states prefer the creation of state-centered networks, while others advocate technocratic networks? This article addresses this question by examining the creation of the Financial Stability Forum (FSF) in 1999. It advances an argument about how domestic regulatory structures and state power explain the variation in regulatory networks that empower certain actors over others in shaping global financial regulation. This article finds that while the USA favored a state-centered FSF, driven by finance ministries, European states preferred a technocratic forum, driven by international bodies. This is because the USA can secure control of state-centered networks given its bargaining weight, while European states tried to constrain US power through technocratic structures, especially under conditions of domestic regulatory fragmentation. The final outcome was a state-centered FSF dictated by the USA. By analyzing primary archival material and interviews with key policymakers, this study sheds light on the state preferences and bargaining capabilities of G7 states. This article also generates portable and testable implications for the creation of other regulatory networks.