Bank Lobbying: Regulatory Capture and Beyond

Author/Editor:

Deniz O Igan ; Thomas Lambert

Publication Date:

August 9, 2019

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

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.

Series:

Working Paper No. 19/171

Subject:

English

Publication Date:

August 9, 2019

ISBN/ISSN:

9781484347546/1018-5941

Stock No:

WPIEA2019171

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

30

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