Lucia Quaglia

University of Bologna | UNIBO

The papers of this special issue investigate the persistent challenges to European Banking Union and explore the tensions between broader financial stability objectives and national political and socio-economic pressures through a diversity of lenses. In this introduction, we examine two main issues that need to be addressed in order to strengthen...

The COVID-19 pandemic triggered a major economic crisis worldwide. The monetary policy response of the European Central Bank (ECB) was fast and massive. The ECB also intervened on the supervisory side because, after the establishment of Banking Union, the ECB was given responsibility for banking supervision in the euro area through the Single Super...

This paper examines the impact of Brexit on UK financial services policy, explaining recent reforms to the domestic financial regulatory framework and assessing the prospects for future divergence from EU rules. Deploying the lens of de-Europeanisation, we show that the failure to include financial services in the final UK-EU Trade and Cooperation...

This article shows that the EU has exerted uneven influence within the global regime complex in shadow banking. Why? We seek to explain the variation in the EU’s ability to exert influence across different elemental regimes—those on hedge funds and securitization—in the broader regime complex over time. In hedge funds regulation, the EU has pursued...

In response to Russia’s full-scale invasion of Ukraine, the Group of Seven (G7) countries and the European Union (EU) adopted a variety of financial sanctions, including the freezing of foreign reserve assets of the Central Bank of Russia held by other central banks. Drawing on a Principal-Agent framework and on speeches, newspaper articles and int...

The COVID-19 pandemic posed unprecedented challenges to the European Union (EU) and its member states. In the EU, health policy competence has been and remains largely with member states. However, faced with a major external crisis, which more or less affected all member states at the same time, the EU developed a framework within which the member...

This essay first outlines the process that led to the establishment of the EMU. It then explains how the sovereign debt crisis unfolded in the eurozone in light of the institutional features of the EMU and its reform in response to the crisis, most notably through the establishment of the Banking Union.

The economic effects of the Covid-19 pandemic have placed a renewed strain on the economic governance of the European Union (EU). The European Central Bank (ECB) was a key player in the EU's response to the crisis induced by the pandemic. This paper adopts a theoretical approach focused on policy learning to explain how and why the ECB responded to...

International non‐majoritarian institutions (NMIs) in finance have proliferated over the last decades. The Basel Committee on Banking Supervision (BCBS) is the main international NMI in finance and the European Union (EU) is one of its core jurisdictions. Despite the far‐reaching effects of international banking standards in the EU, especially the...

Despite the role of shadow banking in the building up of the 2008 international financial crisis, the massive size of this sector, its cross-border nature, and the risks it entails for financial stability, the post-crisis regulation of shadow banking has remained rather feeble. Why? This book identifies a ‘game of shadows’, which unfolded recursive...

Despite the role of shadow banking in the building up of the 2008 international financial crisis, the massive size of this sector, its cross-border nature, and the risks it entails for financial stability, the post-crisis regulation of shadow banking has remained rather feeble. Why? This book identifies a ‘game of shadows’, which unfolded recursive...

Despite the role of shadow banking in the building up of the 2008 international financial crisis, the massive size of this sector, its cross-border nature, and the risks it entails for financial stability, the post-crisis regulation of shadow banking has remained rather feeble. Why? This book identifies a ‘game of shadows’, which unfolded recursive...

Despite the role of shadow banking in the building up of the 2008 international financial crisis, the massive size of this sector, its cross-border nature, and the risks it entails for financial stability, the post-crisis regulation of shadow banking has remained rather feeble. Why? This book identifies a ‘game of shadows’, which unfolded recursive...

Despite the role of shadow banking in the building up of the 2008 international financial crisis, the massive size of this sector, its cross-border nature, and the risks it entails for financial stability, the post-crisis regulation of shadow banking has remained rather feeble. Why? This book identifies a ‘game of shadows’, which unfolded recursive...

Despite the role of shadow banking in the building up of the 2008 international financial crisis, the massive size of this sector, its cross-border nature, and the risks it entails for financial stability, the post-crisis regulation of shadow banking has remained rather feeble. Why? This book identifies a ‘game of shadows’, which unfolded recursive...

Despite the role of shadow banking in the building up of the 2008 international financial crisis, the massive size of this sector, its cross-border nature, and the risks it entails for financial stability, the post-crisis regulation of shadow banking has remained rather feeble. Why? This book identifies a ‘game of shadows’, which unfolded recursive...

Despite the role of shadow banking in the building up of the 2008 international financial crisis, the massive size of this sector, its cross-border nature, and the risks it entails for financial stability, the post-crisis regulation of shadow banking has remained rather feeble. Why? This book identifies a ‘game of shadows’, which unfolded recursive...

Despite the role of shadow banking in the building up of the 2008 international financial crisis, the massive size of this sector, its cross-border nature, and the risks it entails for financial stability, the post-crisis regulation of shadow banking has remained rather feeble. Why? This book identifies a ‘game of shadows’, which unfolded recursive...

Despite the role of shadow banking in the building up of the 2008 international financial crisis, the massive size of this sector, its cross-border nature, and the risks it entails for financial stability, the post-crisis regulation of shadow banking has remained rather feeble. Why? This book identifies a ‘game of shadows’, which unfolded recursive...

Despite the role of shadow banking in the building up of the 2008 international financial crisis, the massive size of this sector, its cross-border nature, and the risks it entails for financial stability, the post-crisis regulation of shadow banking has remained rather feeble. Why? This book identifies a ‘game of shadows’, which unfolded recursive...

Scholarship on regulating global finance emphasizes the importance of national and bureaucratic interests, but less attention has been devoted to epistemic sources of regulatory conflict. We address this by analyzing the failure of regulators to agree tougher rules for large investment funds after the 2008 crisis. The article suggests this outcome...

In this article, we apply the ‘failing forward’ approach to analyse the negotiations on and design of reforms to Eurozone economic governance to tackle the Covid-19-related crisis of Economic and Monetary Union (EMU). This crisis highlights both spill-overs from major asymmetries in EMU and weaknesses in the incomplete economic governance of the Eu...

The role of the European Union (EU) in the post‐crisis international governance of securitization does not sit well with the literature that considers the EU as a ‘paladin’ of stringent regulation as well as a ‘rule‐taker’ in finance. Whereas in the aftermath of the 2008 financial crisis, the United States (US) promoted more stringent rules on secu...

After the 2008 financial crisis, international policy reforms were adopted on various aspects of derivatives markets, highlighting the need for precise and consistent rules. We examine the making of international rules concerning the resilience, recovery and resolution of central counterparties (CCPs), which form acritical global financial infrastr...

Financial systems and the governance of global finance are key topics in International Political Economy (IPE) given the massive size of the financial sector worldwide, the mobility of finance, the cross-border nature of many financial services, the devastation caused by financial crises, and the link between finance and the real economy. This chap...

International regime complexity has become a prominent feature of the global economy and world politics. The international governance of derivatives markets is a notable case of this phenomenon in finance because a variety of post‐crisis rules have been issued by a multitude of international standard‐setting bodies. By combining the regime complexi...

This chapter examines the elemental regime on the reporting of derivatives trades to repositories, including the harmonization of data format and aggregation, the politically charged issue of authorities’ access to data, and the technical issues concerning entities, products, and transactions identifiers. Initially, international standards for trad...

The elemental regime on bank capital for derivatives encompassed the credit valuation adjustment (CVA), the leverage ratio, and bank exposures to CCPs. Like for other parts of Basel III, the US and the UK were pace-setters internationally, promoting relatively precise, stringent, and consistent rules. The EU agreed on the need for higher capital re...

The elemental regime on margins for derivatives not cleared through CCPs was added later on to the international regulatory agenda. The US was a pace-setter at the international level and a first-mover at the domestic level in promoting relatively precise, stringent and consistent margin requirements. The EU supported the US international standard-...

This chapter begins by reviewing several bodies of scholarly works that are relevant to this research, notably, the international relations literature on regime complexity and the international political economy literature on financial regulation. It then discusses three mainstream theoretically informed explanations—a state-centric, a transgovernm...

This chapter provides the context for the rest of the book and establishes the outcomes to be explained. It first outlines the pre-crisis regulation of derivatives markets, which were mostly subject to private sector governance. It then argues that the international regulation of derivatives can be considered as a regime complex that is not a silo-...

This chapter discusses the elemental regimes on derivatives trading and clearing. These international standards remained rather ‘thin’ due to the absence of pace-setting jurisdictions and the foot-dragging of some jurisdictions; disagreements amongst regulators; and the push back from the financial industry. Furthermore, exchange and platform tradi...

This book examines the post-crisis international derivatives regulation by bringing together the international relations literature on regime complexity and the international political economy literature on financial regulation. Specifically, it addresses three interconnected questions. What factors drove international standard-setting on derivativ...

After the crisis, following the mandatory central clearing of derivatives, CCPs became crucial nodes of the financial system. Thus, new rules to improve their resilience, recovery, and resolution were issued. Initially, the division of work amongst international standard-setting bodies was unclear and international standards on CCPs lacked granular...

Given the integration of the City of London into the single market for financial services in the European Union (EU), theories of transnational governance would expect the United Kingdom (UK) to favour close regulatory alignment with the EU27 post-Brexit to maximise market access and financial stability. Surprisingly, however, the UK has consistent...

This contribution combines neo-functionalism and historical institutionalism to understand the implications of differentiated integration in Economic and Monetary Union (EMU) and Banking Union (BU) for the single market in financial services in the European Union (EU). From the 1980s, the relaunch of the Single Market and monetary integration in th...

Why did Euro Area member state governments decide to move to Banking Union (BU)-presented by proponents as a crucial move to 'complete' Economic and Monetary Union (EMU)-only in 2012, over twenty years after the adoption of the Maastricht Treaty? Why has a certain design for BU been chosen and some elements of this design prioritised over others? T...

This article examines the management of the recent banking crisis in Italy. In particular, we investigate the changing coalitional dynamics among Italian banks with a view to identifying the conditions under which banks are more likely to share the costs of crisis management. We argue that banks’ preferences are significantly shaped by the institut...

In the wake of the crisis, regulators at the Financial Services Authority (FSA) sought to develop a tougher approach to overseeing hedge funds. But this push for trading-up regulation was opposed by elected officials, together with the financial industry, on the grounds that this would damage the competitiveness of the sector. The FSA’s capacity to...

This chapter uses the domestic political economy framework to consider the implications of Brexit for UK financial regulation. It outlines the likely future UK–EU relationship by analysing the preferences, role, and influence of key domestic groups on Brexit, and by assessing the EU’s framework for managing relations with third countries. We argue...

As in the case of bank capital, elected officials were quick to respond to voter concerns by substantially expanding regulators’ powers over bank recovery and resolution. In response, regulators developed stringent new rules on loss-absorbing capacity (LAC) and ‘living wills’ for banks. However, the financial industry on the whole did not seek to r...

This chapter reviews the main bodies of literature in international/comparative political economy and public policy, elucidating why existing work has insufficient explanatory power. Second, it then outlines the theoretical framework of the book, its research design, methodology and operationalization, and case-study selection. The analysis employs...

Following the financial crisis, UK preferences shifted decisively in favour of trading up bank capital and liquidity requirements. To reassure voters, elected officials intervened in the regulatory process by strengthening the domestic institutional architecture for banking regulation. Financial regulators leveraged this political support to overco...

This chapter provides the context for the rest of the book. It first outlines the configuration of the financial system in the UK, and the structural and instrumental power of the financial industry. It then discusses the distinctive institutional structures centered around the City–Bank–Treasury ‘nexus’ prior to the crisis and evaluates how the ro...

The book examines the role of the United Kingdom (UK) in shaping post-crisis financial regulatory reform, and assesses the implications of the UK’s withdrawal from the European Union (EU). It develops a domestic political economy approach to examine how the interaction of three domestic groups—elected officials, financial regulators, and the financ...

The main driver of new, stringent rules on bank structure was not pressure from elected officials, as the two largest UK political parties were ambiguous about the benefits of separating retail and investment banking. Instead, we argue that regulators in the Bank of England pushed strongly for ‘ring-fencing’ to address moral hazard concerns caused...

The concluding chapter begins by recalling the main puzzle and research questions set out at the beginning of the book, and by summarizing the main findings from the case study chapters. The second section details the book’s wider empirical and theoretical contribution to the field, as well as providing recommendations for future research. We focus...

UK regulators supported more stringent rules regarding the clearing of over-the-counter derivatives through Central Counterparties (CCPs) on financial stability grounds. Minimal resistance to this came either from elected officials, who paid little attention to the issue, or from the derivatives industry, as many viewed reform as desirable. UK regu...

The decision by the United Kingdom (UK) to withdraw from the European Union (EU) has reignited tensions around the clearing of euro-denominated derivatives. Yet, the EU has resisted concerted pressure from several member states and the European Central Bank (ECB) to force the relocation of euro clearing away from London. Instead, it has opted to st...

After the international financial crisis, new financial regulation was adopted at the international, regional and national levels, raising the issue of how to promote regulatory coherence, defined as the consistency between the rules adopted at different governance levels and in a variety of policy venues. A major recent area of reform concerned th...

What explains the establishment of an ‘incomplete’ Banking Union and its ‘asymmetric’ effects? This paper takes an intergovernmentalistapproach to explain the incompleteness of Banking Union as well as its asymmetric functioning. The institutional design of Banking Union was a compromise between the preferences of the main member states, albeit it...

Following the international financial crisis and the sovereign debt crisis, the European Union (EU) undertook major reforms in three key financial policy areas: financial regulation, Banking Union and Capital Markets Union. This chapter examines the dynamics of these reforms by focusing on the preferences and influence of the United Kingdom (UK) in...

This paper examines the state of the art of the Brexit negotiations in the area of financial services. It uses a two‐level game model to first explain the positions of UK and EU negotiators on the basis of the domestic constraints they face, and second, to consider the scope for final agreement based on the ‘win‐set’ of both sides. The paper analys...

This paper examines the ‘making’ of Capital Markets Union (CMU) through the theoretical lens of ‘actor-centred constructivism’, by considering the ‘policy narratives’ that bureaucratic actors have employed strategically to promote the project. It is argued that two main narratives were articulated by the European Commission in order to mobilize the...

The political economy of Brexit generates new challenges for the UK’s national business model and for European capitalism more broadly. Two symposia examine the implications of the UK’s withdrawal from the EU in key economic policy areas. These symposia contribute to two main bodies of academic literature: the political economy literature on variet...

Brexit poses a profound challenge to the economic fortunes of the financial services sector in the United Kingdom (UK) because it threatens to sever access to the single market in the European Union (EU). Recognising this, the City of London’s largest financial firms and main representative bodies supported a Remain vote in the June 2016 referendum...

This paper analyses the policy developments concerning the Single Market in finance in the context of Brexit. Theoretically, we engage with two bodies of work that make contrasting predictions on European financial market integration and the development of European Union (EU) policies on financial regulation: one focused upon a neo-mercantilist ‘ba...

Why do jurisdictions comply (or not) with international soft law in finance? This research systematically links international and domestic explanations of compliance by highlighting the “disjuncture” between the international standard‐setting process and the process of domestic compliance. Two causal mechanisms that affect compliance are identified...

What explains national preferences concerning international and regional financial regulation? This article focusses on one of the main financial jurisdictions worldwide, the United Kingdom (UK). It is puzzling that since the crisis this jurisdiction has pursued stringent harmonised regulation in certain areas (banking), but not others (capital mar...

The German Government refused to accept the development of a European Deposit Insurance Scheme (EDIS) for Banking Union member states. Publicly, the German Government was preoccupied with the creation of a moral hazard that common funds would create for banks in those participating countries that had weak banking systems. This paper argues that to...

The international financial crisis was followed by the sovereign debt crisis in the euro area. This article discusses the main institutional and policy changes that have taken place in the European Union (EU) in response to these crises. It first examines the EU's response to the financial crisis, distinguishing between the short-term crisis manage...

The development of post-crisis international standards for resolving financial institutions highlights an intriguing puzzle: the European Union (EU), which is often considered as a ‘great financial power’, had a marginal influence in the standard-setting process, which was led by the United States (US) and the United Kingdom (UK). Why? This paper b...

Post-crisis international standards have been agreed on in certain areas of banking regulation, namely capital, liquidity, and resolution, but not others, namely bank structure – why? We articulate a two-step analytical framework that links the domestic and international levels of governance. In particular, we focus on the role of domestic regulato...

The European Union (EU) has been hit by financial and economic crises since 2008. To shed light upon the impact of these crises, this article reviews punctuated equilibrium theory (PET) to develop expectations that are tested against two cases of financial regulation and privatization policy. In one, despite the demand for a new model from EU leade...

The international financial crisis was followed by waves of domestic regulatory reforms, first and foremost, in the United States and the European Union. Post-crisis financial regulation was sometimes different across jurisdictions. Moreover, the United States and the European Union sought in various ways to (re)assert their regulatory power not on...

In the aftermath of the international financial crisis, the European Union (EU) adopted a series of regulatory reforms concerning capital adequacy, bank structures and resolution in order to tackle the risks created by financial institutions that were ‘too big to fail’. This article demonstrates different degrees of progress towards a supranational...

The Basel III Accord was the centrepiece of the international regulatory response to the global financial crisis, setting new capital requirements for internationally active banks. This paper explains the divergent preferences on Basel III of national regulators in three countries that approximate what are frequently presented as distinct varieties...

The article assesses whether the homogeneity of preferences of the largest member states is required for European Union (EU) cohesiveness to materialize ahead of the Group of Twenty (G20) meetings. In particular, it examines the economic preferences of France, Germany and the United Kingdom against the content of the EU-agreed negotiating stance in...

This paper sets out to explain the preferences of the seven northern euro area member states on the Single Supervisory Mechanism (SSM) concerning the threshold set for direct European Central Bank (ECB) control over bank supervision. Building on the concept of the ‘financial trilemma’, it argues that different bank internationalisation patterns in...

The Basel III Accord on a 'Global regulatory framework for more resilient banks and banking systems' was issued in late 2010 as the cornerstone of the international regulatory response to the global financial crisis. Its adoption into European Union (EU) legislation has, however, been met with considerable member state reticence and intra-EU negoti...

Addressing the response to the global financial turmoil in Italy, it is argued that in comparison with other financial systems in Europe and worldwide, the Italian financial system has not been dramatically affected by the financial turmoil for two main reasons: the solid framework for financial regulation and supervision and the traditional unsoph...

The European Union is one of the world's largest financial jurisdictions, and after the global financial crisis has been increasingly active in international financial regulatory fora. What affects its ability (or otherwise) to shape international financial regulation? This analysis focuses at the EU level, arguing that the cohesiveness of the EU p...

Do financial crises promote or hamper transatlantic regulatory cooperation in banking? This article argues that financial crises have an impact upon the alignment of regulatory preferences of the United States (US) and the European Union (EU), causing an ‘ebb and flow’ in transatlantic cooperation. When EU-US preferences are broadly aligned in peri...

This article begins by defining some key concepts in financial regulation. It subsequently discusses the main objectives of financial regulation and supervision, as well as some of the most problematic issues in this area. After reviewing the main perspectives developed in the literature on this topic, the final part of the article outlines the mai...

Have policy makers “learnt their lesson” from the global financial crisis that began in 2007? This article addresses this question by examining the regulatory responses to the global financial crisis in the European Union, the United Kingdom and the Netherlands. Theoretically, the article is informed by an advocacy coalition approach to policy chan...

Financial market policy is an area in which the EU has significantly increased the scope of its activities in the post-Maastricht period. This chapter sees policy-making in this domain as a combination of old and new intergovernmentalism. Deliberation between national authorities played a key role both before and after the global financial crisis o...