What finance wants: explaining change in private regulatory preferences toward sovereign debt restructuring

Abstract

It is widely assumed that when private financial actors seek to influence the regulation of global finance, their preference is for fewer or weaker rules. But is this preference tied to fixed material interests, or is it more malleable? Can it change over time? If so, why might it? I address these questions by examining a recent shift in private creditor preferences toward the regulation of sovereign debt restructuring. I argue that changed material circumstances created demand for regulatory change among creditors but did not determine the nature of their preferred solution. Instead, it was shifts in collectively-held ideas—the specific content of which was informed by important historical and contextual factors—that led private creditors to embrace stronger debt restructuring rules, despite being historically opposed to such rules. In making this argument, the article contributes to a fuller understanding of private market actors in global financial politics, challenging the assumption that these actors necessarily prefer weaker rules, and highlighting the more contingent nature of their regulatory preferences. It also contributes to wider debates about preference formation and change, highlighting important complementarities between distinct theoretical traditions, which together provide a much richer explanation of the case at hand.