Thursday, April 14, 2016
Minuet (DoubleTree by Hilton Philadelphia Center City)
The 2007-2009 financial crisis and the 2012 Spanish cajas crisis both highlighted the need for an overhaul of European banking regulations. By late 2012, negotiations had begun over the formation of a eurozone-wide European Banking Union, which would potentially unify both regulation and resolution procedures. Given its centrality and fiscal clout, Germany’s preferences were expected to dominate in debates over the proposed reforms. However, the ultimate form of the Banking Union more closely reflected French preferences. This paper explores how the structure of banking in the two countries determined how coherent their respective preferences were. In France, banking is overwhelmingly dominated by a handful of large banks with similar preferences on banking union. This produced a coherent and unified policy position on banking union for French negotiators. In Germany, conversely, banking is divided between large internationally-focused banks and smaller domestically-focused ones, creating division within the banking sector over the desired form for banking union. While the large commercial banks had similar goals as the French banks, the smaller savings and mutual banks had much different objectives. These divided preferences among German bankers led to divisions over the goals on banking union among German policymakers as well. The more unified position and clearer objective of French negotiators in turn gave them an advantage over their internally-divided German counterparts. This paper examines the structural bases for these different positions, as well as the public campaigns and interstate negotiations over the Single Supervisory Mechanism and Single Resolution Mechanism in European Banking Union.
