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Beyond financial repression and regulatory capture. The recomposition of European financial ecosystems after the crisis

Monnet, É., Pagliari, S. ORCID: 0000-0003-0612-5296 and Vallée, S. (2019). Beyond financial repression and regulatory capture. The recomposition of European financial ecosystems after the crisis. Actes de la recherche en sciences sociales, 229(4), pp. 14-33. doi: 10.3917/arss.229.0014

Abstract

The financial crisis has radically and rapidly changed the political economy of the European financial system. The evolution of relations between European states and their respective financial systems has given rise to two competing narratives. On the one hand, government agencies are often described as being at the mercy of the financial sector, regularly highjacking political, regulatory and supervisory processes. This trend is often referred to as "regulatory capture" and would explain the "soft touch" regulation and bank bailout. On the other hand, governments are portrayed as subverting markets and abusing the financial system for their benefit, mainly to obtain better financing conditions and allocate credit to the economy on preferential terms, a trend called "financial repression" that is considered corrosive to the proper functioning of free markets and a source of capital misallocation. This paper takes a critical look at this debate in the European context. First, he argues that the relationship between governments and financial systems in Europe cannot be reduced to the polar notions of "capture" and "repression", but that the channels of pressure and influence between governments and their financial systems have often been two-way. Secondly, it puts these issues in a historical perspective and shows that the current reconfiguration of national financial systems in Europe is not simply a return to the "interventionist" policies of the past, although it is influenced by the path-dependency of national institutions and characterised by a broader political and economic role for public bodies (public credit institutions, financial supervision agencies, central bank, European relief fund, etc.).

Publication Type: Article
Subjects: H Social Sciences > HG Finance
J Political Science > JN Political institutions (Europe)
Departments: School of Arts & Social Sciences > International Politics
Date Deposited: 12 May 2020 16:41
URI: https://openaccess.city.ac.uk/id/eprint/23512
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