Advertisement

Securing Finance: Risk, Pre-emption and Resilience

  • John G. Glenn
Chapter
Part of the International Political Economy Series book series (IPES)

Abstract

This chapter examines the changes that have been made to the new financial architecture in the aftermath of the financial crisis. In so doing, the chapter argues that, rather than challenging the management of finance, the reforms have relied mainly upon previous methods albeit in more intensive form. Resilience thinking is apparent, but not the radical post-modern version discussed in Chap.  4. Rather, resilience thinking in policy-making tends to dovetail with other neo-liberal policy reforms and is quite interventionist in its approach in contrast to that predicted by the post-modernist variant of resilience thinking.

The chapter argues that with regard to the financial system, neo-liberal governmentality continues to adopt policies that are analogous to biopolitical strategies. The enframing of the financial system has traditionally been centred around a ‘naturalistic fallacy’. This mode of thinking has clearly continued after the crisis, so that the emphasis has been less on radical reform and more on establishing more restrictive risk parameters and strengthening the nodal points of the system in order that it can withstand economic shocks and the homeostatic ‘norm’ can be reinstated. In addition, the perceived unpredictability of the financial system has led to a stronger emphasis on pre-emption and surveillance. The intensity of surveillance alongside these pre-emptive policies and the degree of coordination between various supervisory bodies since the crisis is such that we can speak of the emergence of a new financial regime. The chapter therefore argues that despite much debate on the emergence of resilience thinking, in the financial sphere at least, there has been little in the way of radical new policy changes of the post-modernist variant discussed in Chap.  4. Rather, resilience thinking in practice actually works symbiotically with and relies upon an array of neo-liberal policies. The chapter also concludes that although the policy of pre-emption has the potential to reinforce the regulatory mechanism, it fails to overcome the paradoxes associated with intervention in a highly complex system.

Keywords

Financial reform Post-crisis regulation Biopolitics Surveillance Pre-emption 

References

  1. Acharya, V., T. Cooley, M. Richardson, and I. Walter, eds. 2010. Regulating Wall Street: the Dodd-Frank Act and the New Architecture of Global Finance. Hoboken: Wiley.Google Scholar
  2. Amoore, L., and M. De Goede. 2008. Risk and the War on Terror. London: Routledge.CrossRefGoogle Scholar
  3. Andenas, M., and H.-Y.I. Chiu. 2014. The Foundations and Future of Financial Regulation. London: Routledge.Google Scholar
  4. Atkins, R. 2011. Central Banks Act to Help Europe Lenders. Financial Times, September 15. Online at http://www.ft.com/cms/s/0/11039e2c-dfa0-11e0-845a-00144feabdc0. html
  5. Bainbridge, S. 2008. The New Corporate Governance in Theory and Practice. Oxford: Oxford University Press.CrossRefGoogle Scholar
  6. ———. 2012. Corporate Governance After the Financial Crisis. Oxford: Oxford University Press.CrossRefGoogle Scholar
  7. Bank of International Settlements. 2010. Group of Governors and Heads of Supervision Announces Higher Global Minimum Capital Standards, September 12. http://www.bis.org/press/p100912.htm
  8. Berg, A., E. Borensztein, G. Milesi-Ferretti, and C. Pattillo. 2000. Anticipating Balance of Payments Crises—The Role of Early Warning Systems. IMF Occasional Paper No. 186. https://www.imf.org/external/pubs/nft/op/186/index.htm
  9. Berg, A., E. Borensztein, and C. Patillo. 2004. Assessing Early Warning Systems: How Have They Worked in Practice? IMF Working Paper, WP/04/52.CrossRefGoogle Scholar
  10. Brief Summary of The Dodd-Frank Wall Street Reform And Consumer Protection Act 2010. Online at http://banking.senate.gov/public/_files/070110_Dodd_Frank_Wall_Street_Reform_comprehensive_summary_Final.pdf
  11. Brummer, C., and R. Loko. 2014. The New Politics of Credit Rating Agency Regulation. In Porter, ed. 2014, 154–176.Google Scholar
  12. Burchell, G., C. Gordon, and P. Miller, eds. 1991. The Foucault Effect: Studies in Governmentality. Chicago: Chicago University Press.Google Scholar
  13. Campbell-Verduyn, M. 2014. Conflicting Trends and Tensions in Post-Crisis Reforms of Transnational Accounting Standards. In Porter, ed. 2014, 177–199.Google Scholar
  14. CMS. 2012. The New European System of Financial Supervision – Institutional Reform Within the EU, March. http://www.law-now.com/cmck/pdfs/nonsecured/ neweuropean reform.pdf
  15. Congress.Gov. 2017. H.R.10 – Financial CHOICE Act of 2017115th Congress (2017–2018). https://www.congress.gov/bill/115th-congress/house-bill/10
  16. Cooper, M. 2006. Pre-empting Emergence: The Biological Turn in the War on Terror. Theory, Culture & Society 23 (4): 113–135.CrossRefGoogle Scholar
  17. ———. 2010. Turbulent Worlds: Financial Markets and Environmental Crisis. Theory, Culture & Society 27 (2–3): 167–190.CrossRefGoogle Scholar
  18. Dean, M. 1994. Critical and Effective Histories: Foucault’s Methods and Historical Sociology. London: Routledge.Google Scholar
  19. Dillon, M. 2008. Biopolitics of Security in the 21rst Century: An Introduction. Review of International Studies 34 (2): 265–292.CrossRefGoogle Scholar
  20. Djankov, S. 2014. Inside the Euro Crisis: An Eyewitness Account. Washington, DC: Institute for International Economics.Google Scholar
  21. Dodd-Frank Act - Dodd-Frank Wall Street Reform And Consumer Protection Act 2010, http://www.sec.gov/about/laws/wallstreetreform-cpa.pdf. Accessed 14 Jan 2014.
  22. Draghi, M. 2012. Principles for the Development of a Macro-Prudential Framework in the EU in the Context of the Capital Requirements Legislation, March 29. https://www.esrb.europa.eu/pub/pdf/2012-03-29_CRR-CRD_letter.pdf?bde429ab505746d6cac9325fca3fca58
  23. European Banking Authority. 2014. EBA Publishes Common Methodology and Scenario for 2014 EU-Banks Stress Test. https://www.eba.europa.eu/-/eba-publishes-common-methodology-and-scenario-for-2014-eu-banks-stress-test
  24. European Commission. 2010. Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the European Central Bank – Bank Resolution Funds, May. http://ec.europa.eu/internal_market/bank/docs/crisismanagement/funds/com2010_254_ en.pdf
  25. ———. 2013. New Rules on Credit Rating Agencies (CRAs) Enter into Force, June 18. http://europa.eu/rapid/press-release_MEMO-13-571_en.htm
  26. ———. 2014. European Parliament Backs Commission Proposals on New Rules to Improve the Quality of Statutory Audit, April 3. http://europa.eu/rapid/press-release_STATEMENT-14-104_en.htm
  27. European Union. 2013. Council Regulation (EU) No 1024/2013 – Conferring Specific Tasks on the European Central Bank Concerning Policies Relating to the Prudential Supervision of Credit Institutions, October 15. http://eur-lex.europa.eu/legal-content/EN/TXT/;ELXSESSIONID=8D94JLLNvydKyyQZPGGFPCJQfkVNGjs7QGQQ6TvQ7Q1wzrTpGLc5!-197644489?uri=CELEX:32013 R1024
  28. Ewald, F. 2005. The Return of the Crafty Genius: An Outline of a Philosophy of Precaution. In O’Malley, ed. 2005, 535–567.Google Scholar
  29. Financial Stability Board. 2010a. Reducing the Moral Hazard Posed by Systemically Important Financial Institutions: FSB Recommendations and Time Lines, October. http://www.financialstabilityboard.org/publications/r_101111a.pdf?frames=0
  30. ———. 2010b. FSB Letter to G20 Leaders on Progress of Financial Regulatory Reforms, November. http://www.financialstabilityboard.org/publications/r101109.pdf
  31. ———. 2011a. FSB Completes Peer Review of Italy, February. http://www.financialstabilityboard.org/press/pr_110207b.pdf
  32. ———. 2011b. Policy Measures to Address Systemically Important Financial Institutions, November. http://www.financialstabilityboard.org/publications/r_111104bb.pdf
  33. ———. 2014a. Thematic Review of the FSB Principles for Reducing Reliance on CRA Ratings (Final Report), May. http://www.financialstabilityboard.org/publications/r_140512.htm
  34. ———. 2014b. Adequacy of Loss-Absorbing Capacity of Global Systemically Important Banks in Resolution. http://www.financialstabilityboard.org/wp-content/uploads/TLAC-Condoc-6-Nov-2014-FINAL.pdf
  35. Fleming, S. 2014. Bank of England Publishes “Stress Test” Scenarios’. Financial Times, April 29. http://www.ft.com/cms/s/0/87283344-cf92-11e3-9b2b-00144feabdc0.html#axzz313P449RO
  36. Foot, R., and A. Walter. 2011. China, the United States, and Global Order. Cambridge: Cambridge University Press.Google Scholar
  37. Foucault, M. 1978. History of Sexuality Vol. 1: Translated by Robert Hurley. New York: Pantheon Books.Google Scholar
  38. ———. 1980. The Confession of the Flesh. In Gordon, ed. 1980, 194–228.Google Scholar
  39. ———. 2003. Society Must Be Defended: Lectures at the College de France, 1975–6. New York: Picador.Google Scholar
  40. ———. 2007. Security, Territory, Population: Lectures at the College de France 1977–78. Basingstoke: Palgrave Macmillan.Google Scholar
  41. ———. 2008. The Birth of Biopolitics: Lectures at the College de France, 1978–79. Basingstoke: Palgrave Macmillan.Google Scholar
  42. Freshfields, Bruckhaus & Deringer. 2010. The New Structure for UK Financial Regulation. http://www.freshfields.com/publications/pdfs/2010 /July10/28528.pdf
  43. G20. 2012. Communiqué of Meeting of G20 Finance Ministers and Central Bank Governors. http://www.g20.utoronto.ca/2012/2012-121105-finance-en.html
  44. Giles, C., and D. Pimlott. 2009. Bank Urges Restraint in Boom Times. The Financial Times, November 21. http://www.FinancialTimes.com
  45. Gordon, C. 1980. Power/Knowledge: Selected Interviews and Other Writings 1972–1977. New York: Pantheon Books.Google Scholar
  46. Gordon, C. 1991. Governmental Rationality: An Introduction. In Burchell, Gordon and Miller, eds. 1991, 1–52.Google Scholar
  47. Haldane, A. 2009. Why Banks Failed the Stress Test. Marcus-Evans Conference on Stress-Testing, February 13, pp. 1–23.Google Scholar
  48. Haldane, A., and T. May. 2011. Systemic Risk in Banking Ecosystems. Nature 469: 371–355.CrossRefGoogle Scholar
  49. Helleiner. 2010. What Role for the New Financial Stability Board? The Politics of International Standards after the Crisis. Global Policy 1 (3): 282–290.CrossRefGoogle Scholar
  50. Helleiner, E., and S. Pagliari. 2009. Towards a New Bretton Woods? The First G20 Leaders Summit and the Regulation of Global Finance. New Political Economy 14 (2): 275–287.CrossRefGoogle Scholar
  51. Helleiner, E., S. Pagliari, and H. Zimmermann, eds. 2010. Global Finance in Crisis: The Politics of International Regulatory Change. London: Routledge.Google Scholar
  52. IMF. 2004. Biennial Review of the Fund's Surveillance, August. www.imf.org/external/np/pdr/surv/2004/082404.htm
  53. ———. 2009. IMF Annual Report 2009: Fighting the Global Crisis. Washington, DC: IMF.Google Scholar
  54. ———. 2010. The IMF-FSB Early Warning Exercise: Design and Methodological Toolkit, September. http://www.imf.org/external/np/pp/eng/2010/090110.pdf
  55. ———. 2011a. IMF Introduces Framework for Low-Income Country Vulnerability Exercise to Assess Impact of External Shocks, March. http://www.imf.org/external/np/sec/pr/2011/pr11102.htm
  56. ———. 2012b. Modernizing the Legal Framework for Surveillance―An Integrated Surveillance Decision, June. www.imf.org/external /np/pp/eng/2012/062612.pdf
  57. ———. 2012c. The IMF’s Financial Surveillance Strategy, August. Available at www.imf.org/external/np/pp/eng/2012/082812.pdf
  58. Independent Evaluation Office. 2011. IMF Performance in the Run-Up the Financial and Economic Crisis: IMF Surveillance in 2004–07. Washington, DC: IMF, January.Google Scholar
  59. Konings, M. 2016. Governing the System: Risk, Finance and Neoliberal Reason. European Journal of International Relations 22 (2): 268–288.CrossRefGoogle Scholar
  60. Krippner, G. 2011. Capitalizing on Crisis: The Political Origins of the Rise of Finance. Harvard: Harvard University Press.Google Scholar
  61. Langley. 2013. Anticipating Uncertainty, Reviving Risk? On the Stress Testing of Finance in Crisis. Economy and Society 42 (1): 51–73.CrossRefGoogle Scholar
  62. Lehmann, M. 2014. Civil Liability of Rating Agencies: An Insipid Sprout from Brussels. LSE Working Paper 15/2014, pp. 1–26. https://www.lse.ac.uk/collections/law/projects/lef/Rating%20Agencies%20Civil%20Liability%20-%20Part%201.pdf
  63. Lenztos, F., and N. Rose. 2009. Governing Insecurity: Contingency Planning, Protection, Resistance. Economy and Society 38 (2): 230–254.CrossRefGoogle Scholar
  64. Lombardi, D. 2011. The Governance of the Financial Stability Board, Brookings Institution Issues Paper, September. http://www.brookings.edu/~/media/research/files/papers/2011/9/23%20financial%20stability%20board%20lombardi/fsb_issues_paper_lombardi
  65. Lupton, D., ed. 1999. Risk and Sociocultural Theory: New Directions and Perspectives. Cambridge: Cambridge University Press.Google Scholar
  66. Mckinsey and Company. 2017. Basel “IV”: What’s Next for Banks? Implications of Intermediate Results of New Regulatory Rules for European Banks, April. https://www.mckinsey.com/~/media/mckinsey/business%20functions/risk/our%20insights/basel%20iv%20whats%20next%20for%20european%20banks/basel-iv-whats-next-for-banks.ashx
  67. McPhilemy, S., and J. Roche. 2013. Part II: The Work of the European Systemic Risk Board. Brussels: European Union.Google Scholar
  68. O’Malley, P., ed. 2005. Governing Risks. Aldershot: Ashgate.Google Scholar
  69. ———. 2010. Resilient Subjects: Uncertainty, Warfare and Liberalism. Economy and Society 39 (4): 488–509.CrossRefGoogle Scholar
  70. ———. 2013. Uncertain Governance and Resilient Subjects in the Risk Society. Oñati Socio-Legal Series 3 (2): 180–195.Google Scholar
  71. Pisani-Ferry, J. 2014. The Euro Crisis and Its Aftermath. Oxford: Oxford University Press.CrossRefGoogle Scholar
  72. Rasmussen, M.V. 2006. The Risk Society at War: Terror, Technology and Strategy in the Twenty-First Century. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
  73. Ravoet, G. 2014. Banking Union Helps Restore Confidence. Bankar, March.Google Scholar
  74. Rose, N., and P. Miller. 2008. Governing the Present. Cambridge: Polity Press.Google Scholar
  75. Schultz, P. 2014. Conclusions. In Perspectives on Dodd–Frank and Finance, ed. P. Schultz, 227–232. Cambridge, MA: MIT Press.Google Scholar
  76. Securities and Exchange Commission. 2013. Report to Congress: Credit Rating Agency Independence Study. Washington, DC: Securities and Exchange Commission, November.Google Scholar
  77. Singapore Risk Management Institute. 2013. Global Credit Review. Vol. 2. Singapore: World Scientific Publishing.Google Scholar
  78. Tarullo, D. 2008. Banking on Basel: The Future of International Financial Regulation. Washington, DC: Peter G. Peterson Institute for International Economics.Google Scholar
  79. Tett, G. 2009. Fool’s Gold: How Unrestrained Greed Corrupted a Dream, Shattered Global Markets and Unleashed a Catastrophe. London: Little Brown.Google Scholar
  80. The Economist. 2009d. Financial Reform in America: New Foundation, Walls Intact, June 20–26, p. 29.Google Scholar
  81. ———. 2009e. Reforming Finances: The EU’s Proposal – Divided by a Common Market, July 4–10, p. 67.Google Scholar
  82. The Economist 29 March – 4 April 2014. American Banks: A Harsh Light – A Handful of Banks Are Caught Short by the Fed’s Annual Stress Test, p. 77.Google Scholar
  83. The Financial Times. 2009. Bernanke’s Remarks to the Federal Reserve Bank of Boston, October 23. http://www.FinancialTimes.com
  84. Tysiac, K. 2013. Bill Prohibiting Mandatory Audit Firm Rotation Passes U.S. House. Journal of Accountancy, July. http://www.journalofaccountancy.com/news/20138294.htm
  85. Vestergaard, J. 2009. Discipline in the Global Economy?: International Finance and the End of Liberalism New Political Economy. New York: Routledge.Google Scholar
  86. Zebrowski, C. 2009. Governing the Network Society: A Bio-political Critique of Resilience. Political Perspectives 3 (1): 1–36.Google Scholar
  87. ———. 2016. The Value of Resilience: Securing Life in the Twenty-First Century. London: Routledge.Google Scholar

Copyright information

© The Author(s) 2019

Authors and Affiliations

  • John G. Glenn
    • 1
  1. 1.Politics and International RelationsUniversity of SouthamptonSouthamptonUK

Personalised recommendations