The Growth of Shadow Banking
A Comparative Institutional Analysis
Cambridge University Press, 2018
The ‘shadow banking system’ refers to a system of credit-provision occurring outside of the official regulatory perimeter of commercial banks. Facilitated by securitization vehicles, mutual funds, hedge funds, investment banks and mortgage companies, the function and regulation of these shadow banking institutions has come under increasing scrutiny after the subprime crisis of 2007–8. Matthias Thiemann examines how regulators came to tolerate the emergence of links between the banking and shadow banking systems. Through a comparative analysis of the US, France, the Netherlands and Germany, he argues that fractured domestic and global governance systems determining the regulatory approach to these links ultimately aggravated the recent financial crisis. Since 2008, shadow banking has even expanded and the incentives for banks to bend the rules have only increased with increasing regulation. Thiemann’s empirical work suggests how state-finance relations could be restructured to keep the banking system under state control and avoid future financial collapses.
Reviews
“Ten years after the Great Financial Crisis, with regulations remaining mostly unchanged, this book offers a new paradigm for designing financial regulation. Thiemann situates the rise of shadow banking in ill-designed and often highly fragmented regulatory structures – an ideal breeding ground for regulatory arbitrage. Based on a careful comparative analysis of accounting governance in several countries, he argues for greater proximity of regulators to the regulated and a diversity of perspectives to avoid cognitive capture. Even more daring, Thiemann argues that regulators should not fall for the demand by the industry for certainty but instead should force regulatory uncertainty on the financial engineers to keep them on course. When the old regulatory structure inevitably fails us again, we will be better prepared to put a new regime in place and this book offers a new, empirically grounded, strategy.”Katharina Pistor – Edwin B. Parker Professor of Comparative Law, Columbia Law School
“Matthias Thiemann’s The Growth of Shadow Banking is a highly insightful contribution that provides a fresh perspective on what led to the spread of shadow banking”Dylan Cassar. Source: Economic Sociology
The Reinvention of Development Banking in the European Union
Industrial Policy in the Single Market and the Emergence of a Field
Edited by Daniel Mertens, Matthias Thiemann, and Peter Volberding
Oxford University Press, 2021
National development banks (NDBs) have transformed from outdated relics of national industrial policy to central pillars of the European Union’s economic project. This trend, which accelerated after the Financial Crisis of 2007, has led to a proliferation of NDBs with an expanded size and scope. However, it is surprising that the EU — which has championed market-oriented governance and strict competition policy — has actually advocated for an expansion of NDBs. This book therefore asks, Why has the EU supported an increased role for NDBs, and how can we understand the dynamics between NDBs and European incentives and constraints?
To answer these questions, the contributing authors analyze the formation and evolution of a field of development banking within the EU, identifying a new field around an innovative conceptualization of state-backed financing for the purposes of policy implementation. Yet rather than focusing solely on national development banks, the authors instead broaden the focus to the entire ecosystem of the field of development banking, which includes political institutions (both in Brussels and in the member states), financing vehicles (such as the Juncker Plan), regulatory bodies (Directorate-General for Competition, Directorate-General for Economic and Financial Affairs), and commercial actors. Seven in-depth case studies on European NDBs, along with three chapters on European-level actors, detail this field of development banking, and answer the questions of when, where, and how development banking occurs within the EU.
- Offers a new account of how national development banks are specifically impacted by EU regulations and constraints
- Provides a synthetic view of the European field of development banking so readers can gain an understanding of how NDBs relate to EU institutions such as the European Investment Bank and European Investment Fund
- Includes seven detailed case studies of European NDBs
- Reviews the promises and pitfalls of European development banking going forward
Reviews
“This timely and innovative contribution explains the new ways in which European authorities, at both national and supranational levels, seek to exploit a renewed focus on development banking to advance critical economic and political goals. The volume shows that tensions abound, strategies differ, and the fight over rules is far from settled. The authors here provide a comprehensive account of development banking’s evolution in Europe, while also distilling a number of new and very surprising findings about the engines of change. The study thus explains development banking’s new role and power, but also attunes us to the larger phenomenon of capitalism’s transformation over time.”Rachel A. Epstein, Professor of International Relations and European Politics at the Josef Korbel School of International Studies, University of Denver
“Finance is not neutral. The type of finance determines how growth in the real economy is structured. This book is an important contribution, advancing our understanding of this relationship and hence how finance is shaped and can be shaped to deliver long-run development and growth trajectories in Europe. It provides a rich history of the different evolutions, trajectories, and institutional setups of national development banks while also uncovering key lessons about instruments, structures, and levels of coordination across policy spheres. This is a valuable reading for anyone interested in the political economy of development banking and the various roles that development banks and institutions can play to deliver economic goals.”Mariana Mazzucato, Professor in the Economics of Innovation and Public Value at University College London and Founding Director of the Institute for Innovation and Public Purpose (IIPP)
Taming the Cycles of Finance?
Central Banks and the Macro-prudential Shift in Financial Regulation
Cambridge University Press, 2024
Macroprudential regulation is a set of economic and policy tools that aim to mitigate risk in the financial and banking systems. It was largely developed in response to the financial crisis of 2007-08, turning central banks into de facto financial policemen. Taming the Cycles of Finance traces the post-crisis rise of macroprudential regulation and argues that, despite its original aims, it typically supports finance in times of crisis but fails to curb it in times of booms. Investigating how different macroprudential frameworks developed in the UK, the USA and the Eurozone, the book explains how central bank economists went about building early warning systems to identify fragilities in the financial system. It then shows how administrative and political constraints limited the effects of this shift, as central banks were wary of intervening in a discretionary manner and policymakers were opposed to measures to limit credit growth.