TY  - UNPD
A1  - Haselmann, Rainer
A1  - Sarkar, Arkodipta
A1  - Singla, Shikhar
A1  - Vig, Vikrant
T1  - The political economy of financial regulation
N2  - Using the negotiation process of the Basel Committee on Banking Supervision (BCBS), this paper studies the way regulators form their positions on regulatory issues in the process of international standard-setting and the consequences on the resultant harmonized framework. Leveraging on leaked voting records and corroborating them using machine learning techniques on publicly available speeches, we construct a unique dataset containing the positions of banks and national regulators on the regulatory initiatives of Basel II and III. We document that the probability of a regulator opposing a specific initiative increases by 30% if their domestic national champion opposes the new rule, particularly when the proposed rule disproportionately affects them. We find the effect is driven by regulators who had prior experience of working in large banks – lending support to the private-interest theories of regulation. Meanwhile smaller banks, even when they collectively have a higher share in the domestic market, do not have any impact on regulators’ stand – providing little support to public-interest theories of regulation. Finally, we show this decision-making process manifests into significant watering down of proposed rules, thereby limiting the potential gains from harmonization of international financial regulation.
T3  - LawFin Working Paper - No. 45 
KW  - Political Economy
KW  - Financial Regulation
KW  - Textual Analysis
Y1  - 2022
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/68206
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-682062
UR  - https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4250919
N1  - The paper benefited significantly from Shikhar Singla’s visit as a research fellow at the Center for Advanced Studies on the Foundations of Law and Finance at Goethe University, funded by the German Research Foundation (DFG) under the project FOR 2774.
PB  - Center for Advanced Studies on the Foundations of Law and Finance, House of Finance, Goethe University
CY  - Frankfurt am Main
ER  -