Bank Lobbying: Regulatory Capture and Beyond

In this paper, we discuss whether and how bank lobbying can lead to regulatory capture and have real consequences through an overview of the motivations behind bank lobbying and of recent empirical evidence on the subject. Overall, the findings are consistent with regulatory capture, which lessens t...

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Bibliographic Details
Main Author: Igan, Deniz
Other Authors: Lambert, Thomas
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2019
Series:IMF Working Papers
Subjects:
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
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653 |a Economic & financial crises & disasters 
653 |a Depository Institutions 
653 |a Banks 
653 |a Finance 
653 |a Financial crises 
653 |a Public finance & taxation 
653 |a Political Economy 
653 |a Banks and banking 
653 |a Industries: Financial Services 
653 |a Financial institutions 
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653 |a Global financial crisis of 2008-2009 
653 |a Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior 
653 |a Banks and Banking 
653 |a Financial Institutions and Services: General 
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520 |a In this paper, we discuss whether and how bank lobbying can lead to regulatory capture and have real consequences through an overview of the motivations behind bank lobbying and of recent empirical evidence on the subject. Overall, the findings are consistent with regulatory capture, which lessens the support for tighter rules and enforcement. This in turn allows riskier practices and worse economic outcomes. The evidence provides insights into how the rising political power of banks in the early 2000s propelled the financial system and the economy into crisis. While these findings should not be interpreted as a call for an outright ban of lobbying, they point in the direction of a need for rethinking the framework governing interactions between regulators and banks. Enhanced transparency of regulatory decisions as well as strenghtened checks and balances within the decision-making process would go in this direction