In the wake of the global financial crisis (GFC), a significant number of countries saw their financial systems, markets, and regulatory frameworks changed forever. In this important book, Bank Politics: Structural Reform in Comparative Perspective, David Howarth and Scott James uncover why seemingly similar countries varied in their response to the GFC when enacting banking reforms. This book is very much in the tradition of explaining the political drivers of economic reforms to help the reader understand why and how countries diverge in their economic policies. A key contribution is its focus on a relatively understudied but important topic in modern economies—that is, banking reforms, defined as structural separation or “ringfencing” of practices and entities (6). It puts forward a novel explanation for why some authorities pushed through tougher (i.e., stronger) structural separation after the GFC than others did. The cases considered are the United States, United Kingdom, France, Germany, the Netherlands, and the EU.

The authors take an interest group, preference-based approach to understanding why and when authorities undertake structural bank reforms. Bank Politics makes two important claims, both of which contribute to the existing literature. First, the authors start with the idea that actors in the financial sector have interests and preferences and that these interests and preferences vary. This interest heterogeneity can either get in the way of or benefit lobbying efforts for a policy. Consequently, the unity of the sector not only has consequences for collective action (i.e., how members come together) but also for the clarity of their collective ambitions when they lobby regulators and policy makers. The authors classify a country’s financial sector into two types: those with “competitive financial power” in which the sector is divided and those with “cooperative financial power” where the sector is more unified.

Second, the authors consider the role that delegation plays in bank reforms. They argue that, by strategically locating the venue for debate, politicians can use delegation to make it either harder or easier to reach policy agreement on banking reforms. Delegating to smaller and more technical groups, they argue, makes for easier conflict resolution, and bank reforms are hence more likely to succeed. By contrast, larger and more heterogenous groups make for more difficult resolution, and bank reforms are therefore more likely to fail. From these two variables—financial power and delegation—the authors create a 2 x 2 typology of bank structural reform with four types: Durable Reform, No Reform, Contested Reform, and Symbolic Reform. The case studies are placed into these types for theory-testing purposes. For example, using process tracing, they illustrate why the United Kingdom adopted new rules relatively easily, whereas in Germany, France, and the Netherlands, tough reforms failed to materialize.

The authors’ starting point—the heterogeneity of the financial sector and its demands—is particularly refreshing. This is because the banking industry is often assumed to be homogeneous and conservative, but as the authors show, it is sometimes neither. Furthermore, the fact that the financial system changed rapidly throughout the financial crisis and that uncertainty was extremely high made it hard for the financial sector to come together with “one voice.” Alternatively, as the authors show, high political salience, especially in the United States, was not enough to push through serious banking reforms. Indeed, the authors show multiple instances when the financial sector was able to thwart tough reforms despite high uncertainty or when politics and politicians got in the way of regulations that would, if enacted, be in the public interest.

The authors test their theory of bank reforms using case studies and interviews. They find a wealth of results, too numerous to chronicle here, so I only outline a few as a teaser. Surprisingly they show how countries such as the Netherlands and Germany were only able to adopt Symbolic Reforms because of political blockages. Alternatively, they find that the United Kingdom was able to adopt Durable Reforms because politicians and senior regulators were willing and able to limit the influence of the UK banking sector. Yet in France, the ability of large French banks and peak associations to “speak with (nearly) one voice” (196), as well as national sentiments and threats of foreign takeovers, supported already friendly relations between French officials and bankers. Unfortunately, the authors show how this cooperation between politicians and industry led France to underperform in terms of strengthening its bank reforms.

The case studies are fascinating illustrations of the way that bank reform was managed (or not) and the way that politics shaped or stalled financial recovery. For people interested in financial crises or the revolving door between politicians, the financial sector, and regulation in wealthy countries, this is a remarkable book. However, one factor that very obviously played a key role in the case studies, but less so in the theory, is the role of time. Indeed, the sequencing or starting and stalling of reforms led me to think of earlier literature on partial reforms (see Joel S. Hellman, “Winners Take All: The Politics of Partial Reform in Postcommunist Transitions,” World Politics 50(2), 1998); and Timothy Frye, Building States and Markets after Communism: The Perils of Polarized Democracy, Cambridge University Press, 2010). According to the partial-reforms literature, people win and lose at various stages over time during reform implementation. Those who win early are therefore incentivized to block later reforms that may interfere with their winnings. A related issue is also the role that credible commitment might play. Early winners might announce at the start of any reforms that they support substantial bank reforms, which take time to implement. When the industry is divided, it can be harder for some members to believe that the industry’s commitment to later reforms is credible. Credible commitment issues may then lead to important actors not backing earlier reforms, even though they may subsequently benefit from them. Therefore, it may not be the case that divided groups have problems organizing as a consequence of collective action but that they have commitment issues. I would have liked the authors to engage a bit more with the differences between collective action and commitment in their review of alternative explanations, especially because evidence of both collective action and commitment at work can be found in the case studies. This is especially important because the measure of a divided or unified financial sector is derived not from observed behavior but rather from “long standing institutional features of interest representation” (44–46).

Finally, I would like to see the theory tested on a larger sample of countries. In chapter 3, the authors mention commitments made at the Group of 20 (G20), in which the five countries examined in the case studies participated. Operationalizing the authors’ key variables, interest group lobbying and venue shifting, for a larger and more diverse group of countries is challenging, and it is therefore understandable that this is missing in this book. Future research, however, may want to tackle this. A larger sample of countries may offer not only greater evidence in support of the authors’ theory but also additional conditioning variables, especially for the poorer countries in the G20. Furthermore, because the G20 includes member states with a history of financial crises—Argentina and Brazil, for example—it might also be fruitful to ask whether venue shifting works mainly as a political-calming strategy, as the authors show with their case studies, and whether it can operate as a market-calming strategy as well. It is possible to imagine ways in which the delegation of policy decision making to technocrats changes the flow of information to market participants. It would therefore be interesting empirically to analyze whether markets rewarded or punished delegation. Did markets view venue shifting, when it occurred, as a costly signal of reform success?

Overall, this is a fascinating book and an especially readable one. It is interesting and full of important details and draws on excellent primary and secondary research.