The Power of Political Networks: Lobbying and Policy Entrepreneurship in the UK Banking Reform Process

This paper sets out to explain the UK banking reform process which will bring profound structural changes to the industry. It does so by examining the nature of policy entrepreneurship surrounding the Independent Commission on Banking which was established between 2010-2011. The analysis proceeds in two parts. First, we use Social Network Analysis (SNA) to model the lobbying network surrounding the banking reform process and to identify the most central actors involved. In-depth interviews with the main participants are used to verify the extent to which these actors engaged in policy entrepreneurship and to assess their relative influence in shaping policy outcomes. Our empirical findings reveal important differences in the lobbying strategies, policy preferences and perceived influence of the main banks, trade associations and regulatory authorities involved. The results show that HSBC and Lloyds played a quiet entrepreneurial role which enabling them to extract important concessions, while Barclays was less influential as the public face of opposition to the reforms. In addition, while the wider business community was divided on the issue of ringfencing, consumer groups were largely marginal to the process. Second, we employ a formal logistic regression model to examine the relationship between network structure and agency attributes. The paper tests six hypotheses to explain why certain actors are more central than others. It suggests that while network centrality is positively correlated with organisational capacity and leadership, it is negatively correlated with trust and utility loss: an outcome which is significant for our understanding of lobbying networks.