Negotiating the Future of Banking: To Reduce or Not Bank Dependence?

The present paper addresses the question of how the future of banking was renegotiated after the financial crisis in political economies with more bank-based financial systems and it focuses on the puzzling divergence of policy conclusions drawn from the crisis. Based on the insights from empirical fieldwork conducted in France and Germany in 2013, including 70 interviews, the paper shows that divergent policy priorities emerged in both countries post-crisis: Whereas an agreement on strengthening so-called ‘alternative’ sources of funding emerged in France, the political priority in Germany was on restoring classic bank lending.

The paper shows that key explanatory factors, such as the availability and the cost of bank credit, the pre- or absence of a credit crunch as well as the structure of the corporate sector, cannot account for the emergence of these divergent policy agendas. Instead, I argue that the divergent policy responses, which emerged in France and Germany post-crisis, have to be seen as the outcome of processes of collective preference formation under conditions of increased situational uncertainty due to interpretational ambiguity. Major events, such as a financial crisis, can lead to the questioning of taken for granted assumptions related to the functioning of the economy which, in turn, leads to the emergence of competing interpretations of what the situation is about and how to deal with it. If this is the case, central actors of the political economy need to come together to reduce interpretational ambiguity through a process of collective preference formation. The paper contributes to the study of institutional change in financial sectors by offering a non-deterministic process-model of how institutional change can come about.