Stefano Pagliari | City, University of London (original) (raw)

PhD Thesis by Stefano Pagliari

What explains the shift towards greater direct public oversight of financial markets in internati... more What explains the shift towards greater direct public oversight of financial markets in international financial regulation that has characterized the response to the global financial crisis of 2007-2010? Over this period, the main international financial regulatory bodies have abandoned the market-based mechanisms that had informed their approach towards the regulation of different financial domains in the years before the crisis and significantly expanded the perimeter of state-based regulation. However, the extent and the timing of this shift cannot be regarded only as the by-product of the crisis, nor they can be explained by the existing interpretations of the political determinants of international regulatory policies. This study builds upon existing state-centric explanations of international regulatory policies, but it goes beyond these works by exploring how the preferences of the most influential countries in response to the crisis have been influenced by variations in the degree of public salience of different financial domains. More specifically, this study argues that the lasting increase in the public salience of financial regulatory policies in the US and different European countries since the last quarter of 2008 has created strong incentives for elected officials in these countries to challenge the market-based approach that had emerged in the decade and half before the crisis and to directly interfere in the international regulatory agenda. In order to explain this shift, this study will analyse the evolution in the international governance of three sets of markets and institutions that have occupied an important position in the international regulatory agenda in recent years: 1) OTC derivatives; 2) rating agencies; 3) hedge funds. Besides making an empirical contribution to the literature on the politics of international financial regulation, this study also contributes theoretically to this literature by deepening our understanding of the nexus between international regulatory coordination and domestic public opinion.

Papers by Stefano Pagliari

Socio-Economic Review, 2021

Non-financial corporations (NFCs) have acted as vocal and important allies with the financial ind... more Non-financial corporations (NFCs) have acted as vocal and important allies with the financial industry when it comes to advocacy over regulatory policy. Why? We explore this question in the context of the lobbying activity surrounding the financial policy reforms in the USA following the global financial crisis. We propose a range of explanations for why some NFCs might become 'financial activists' in support of the financial industry, while others remain passive. We find a wide range of indicators of firm-level financialization to be unreliable predictors of NFC financial activism, in addition to indicators of potential external control by financial firms through ownership or subsidiarization. NFC financial activism appears to be related to how a given firm is embedded in broader structures of corporate networks, relational political action and ideology.

Comparative Politics, 2020

This paper investigates the politics of holding bank executives accountable for banking crises. T... more This paper investigates the politics of holding bank executives accountable for banking crises. The aftermath of the 2008 global financial crisis was characterized by a significant variation in the extent to which European countries endorsed this type of retributive justice. In particular, while some countries established special prosecutorial bodies and took steps to facilitate prosecutions, others seemed to consider the crisis "business as usual" and relied on the existing investigative and prosecutorial mechanisms to seek out wrongdoing. We explore the experiences of two European countries, Iceland and Cyprus. We argue that the way a financial crisis unfolds plays a significant role in shaping the appetite of politicians for promoting an agenda of retributive justice. With a banking collapse, politicians will be most proactive, as voters' demand for justice is high and the risks for the banking industry are minimal. With a severe yet negotiated crisis following a bailout/bail-in, politicians are more reluctant to endorse policies that may risk the recovery of the fragile banking sector.

Regulation & Governance, 2020

Financial crises are often presented as triggers for important innovations in international regul... more Financial crises are often presented as triggers for important innovations in international regulation of financial markets, but existing evidence for this claim primarily derive from the analyses of individual initiatives, assessed against noncomparable benchmarks. In order to provide systematic evidence of financial crises' impact on international financial regulatory change, this paper develops a novel text-as-data approach to measure regulatory novelty. We use this approach to analyze the full population of international banking and securities standards between 1975 and 2016. Contrary to theoretical expectations , our empirical findings indicate rules designed by international banking and securities regulators following financial crises are on average as likely to build on existing international regulations as those designed before a crisis. We also find that international banking rules published after the 2008 Global Financial Crisis are an important exception.

Review of International Political Economy, 2020

Regulatory initiatives are frequently shaped by the ability of the financial industry to build al... more Regulatory initiatives are frequently shaped by the ability of the financial industry to build alliances across the wider business community. Yet comparative and international political economy scholarship remains divided over how to explain the resulting networks of financial lobbying. Using quantitative text analysis of more than 8000 responses to EU financial regulatory consultations between 2010 and 2018, we map patterns of lobbying coordination based on co-signing and text re-use in consultation responses for the first time. This unique dataset is used to analyse hitherto hidden patterns of domestic and cross-border coordination by financial organizations within and between European countries. We find that while distinctive national lobbying networks persist at the country level, the internationalization of financial actors is statistically associated with the formation of coordination ties with foreign financial actors. This suggests that European financial integration has facilitated the emergence of new cross-border alliances which complement-rather than substitute for-existing domestic financial interest coalitions. We argue that the text-as-data approach employed here makes an important new contribution to scholarship on business power and the political economy of Europe. Acknowledgements: The authors wish to thank the three anonymous reviewers for their helpful and constructive comments.

Journal of European Public Policy, 2020

The presence of communication channels plays a key role in how interest groups engage in EU polic... more The presence of communication channels plays a key role in how interest groups engage in EU policymaking. However, the capacity of researchers to explain these patterns is constrained by the informal and opaque nature of such interaction. In this paper we develop a novel text-as-data approach which maps the informal patterns of information exchange among the stakeholders that engage with EU policymaking by detecting instances of text reuse among the comment letters submitted by these groups to the same policy proposal. We use this approach to analyse a novel dataset of publicly available comments to a wide a range of EU policies. We find that there are significant differences between the structure of information exchange networks and more formal lobbying coalitions in the EU, as well as between the groups that engage in these forms of coordination.

Chapter included in the volume “Governing the World's Biggest Market: The Politics of Derivatives Regulation After the 2008 Crisis”, edited by Eric Helleiner, Stefano Pagliari and Irene Spagna, Oxford University Press 2018, 2018

While the signing of the Dodd-Frank Act into federal law by President Barack Obama in July 2010 h... more While the signing of the Dodd-Frank Act into federal law by President Barack Obama in July 2010 has received considerable attention, this represented only an intermediate step in the process of reforming the regulation of derivatives markets in the US after the crisis. Equally important in in defining the true impact and effectiveness of the post-crisis reforms was the implementation of the same Dodd-Frank by US regulatory agencies. In the case of Dodd-Frank derivatives rules, the centrality of the implementation phase was heightened by the significant latitude that the primary legislation designed by the US Congress granted regulators in defining how derivatives markets should be regulated. As a result, before the ink of Dodd-Frank had even dried, critics of the legislation had identified in the implementation stage a key opportunity to amend and potentially turn the clock back on some of the measures introduced by Congress to regulate derivatives markets. This chapter will investigate the implementation of Dodd-Frank derivatives rules between 2010 and 2015 and argue that this phase brought to a halt the tightening in the regulation of derivatives markets that had been set in motion by financial crisis.

Socio-Economic Review, 2018

Political economists have often drawn a hard line between the interests of owners of capital and ... more Political economists have often drawn a hard line between the interests of owners of capital and the interests of labor. Yet over the past 30 years in Anglo-Saxon countries in particular, workers have become increasingly invested in capital markets activity through the privatization of pension systems and other incentives for market-based savings. In this paper we investigate whether this " financialization of everyday life " has generated a convergence of policy preferences whereby individuals support policies traditionally associated with the financial sector. Using three separate datasets on the US population, we find evidence that financial asset ownership is associated with lower support for more stringent financial regulatory policy, and higher support for financial sector bailouts. Such effects on individual preferences are modest on average, but persist even when controlling for indicators of social class and a range of other conditions, circumstances and time periods. 2

Existing literature has offered a variety of claims regarding why financial regulatory politics f... more Existing literature has offered a variety of claims regarding why financial regulatory politics features a relative dominance of the regulated financial industry. In this article we explore the broader interest group environment in which financial industry advocacy operates. Using new data on interest group participation in financial regulatory consultations, we provide the first comprehensive analysis of the ecology of interest groups that populate financial regulatory policymaking. Through a new measure of ‘mobilized dissent’ we find evidence that the level of interest group pluralism in financial regulatory policymaking is constrained by the limited mobilization of voices outside of the business community. We analyze how mobilized dissent toward the regulated financial industry changes in response to different institutional environments. While technical complexity, institutional context, and the global financial crisis are found to impact the level of mobilized dissent, the impact of these environmental conditions varies across different groups. This analysis reveals not only that organized opposition to the financial industry is relatively weak but also that it is relatively disjointed.

While organized business is a key actor in regulatory politics, its influence is often conditiona... more While organized business is a key actor in regulatory politics, its influence is often conditional on the level of unity or conflict occurring within the business community at any given time. Most contemporary regulatory policy interventions put pressure on normal mechanisms of business unity, since they are highly targeted and sector-specific. This raises the question of how business unity operates across a highly variegated economic terrain in which costs are asymmetric and free-riding incentives are high. In the paper we empirically assess patterns of business unity within regulatory policymaking across different regulated sectors. Our analysis utilizes data from hundreds of regulatory policy proposals, and business community reactions to them in the telecommunications, energy, agriculture, pharmaceutical and financial sectors over a variety of institutional contexts. We find considerable empirical support for the ‘finance capital unity’ hypothesis – the notion that the financial sector enjoys more business unity than do other regulated sectors of the economy. When the financial sector is faced with new regulations, business groups from other sectors frequently come to its aid.

The power of financial industry groups is a subject of widespread academic and public debate. Exi... more The power of financial industry groups is a subject of widespread academic and public debate. Existing international political economy (IPE) research has highlighted how different resources, institutions and structural features allow financial industry groups to influence financial regulatory policymaking. In so doing, however, this literature routinely tends to neglect the wider array of interest groups beyond the particular financial industry groups being regulated. Actor plurality is usually assumed to be low or inconsequential. Such an assumption obscures the important role that actor plurality may play in the policymaking process. We present new quantitative and qualitative evidence demonstrating how global financial regulatory politics is more plural than most existing depictions would suggest. Actor plurality can have significant effects in 'leveraging' the influence of financial industry groups which are often able to tie their interests with those of other private sector groups affected indirectly by the regulation in question. We illustrate this underappreciated facet of financial industry power through a variety of case-based evidence from the formation of banking and derivatives rules in various jurisdictions, both before and after the global financial crisis of 2008-2009.

This article explores the impact of the European regulatory response to the global financial cris... more This article explores the impact of the European regulatory response to the global financial crisis in the governance of transatlantic financial markets. The main argument is that European regulatory initiatives have sought to expand European regulatory clout over market actors domiciled in third countries but operating in European markets, thus departing from the authority-sharing arrangements that had informed the construction of an integrated transatlantic market for financial services in the period preceding the crisis. The article will explain this shift in the European approach towards the regulation of transatlantic markets by exploring the reconfiguration of EU financial regulatory politics triggered by the financial crisis. This argument will be developed by analysing the regulatory framework introduced in the EU to regulate OTC derivatives, rating agencies, and hedge funds.

International organization, Jan 1, 2011

The global financial crisis that erupted in summer 2007 has made the reform of international prud... more The global financial crisis that erupted in summer 2007 has made the reform of international prudential financial regulation one of the top priorities of global public policy+ Past scholarship has usefully explained the creation and strengthening of international financial standards with reference to three policy arenas: interstate, domestic, and transnational+ Despite the accomplishments of this specialist literature, the recent crisis has revealed a number of limitations in the ways scholars have understood interstate power relations, the influence of domestic politics, and the significance of transnational actors within international financial regulatory politics+ Taken together, developments in each of these three arenas suggest that researchers may also need to be prepared to shift from explaining the strengthening of official international standards to analyzing their weakening in the postcrisis world+ The latter task will require scholars to devote more analytical attention to a wider set of international regulatory outcomes, including "informal regulatory convergence," "regulatory fragmentation," and especially "cooperative regulatory decentralization+"