Transnational regulatory capture? An empirical examination of the transnational lobbying of the Basel Committee on Banking Supervision

ABSTRACT Since the global financial crisis, scholars of international political economy (IPE) have increasingly relied on the concept of ‘regulatory capture’ to explain the weakness of regulatory oversight and, hence, regulatory failures. Yet despite the widespread use of the concept of regulatory capture, its precise mechanisms are not well understood. This paper empirically investigates this hypothesis by examining one important institution of global financial governance that has been subjected to intense private sector lobbying at the transnational level: the Basel Committee on Banking Supervision. Using extensive archival material as well as interviews with participants in the generation of the Basel II Capital Accord, I argue that while private sector lobbyists had unprecedented access to the regulatory policymaking process, this access did not always translate into influence. Furthermore, when influence was present, it sometimes had the effect of increasing regulatory stringency, rather than weakening regulation. As such, I argue that our understanding of the process of transnational policy formation would benefit from a more nuanced understanding of the contingency of private sector ‘influence’ over the regulatory process, rather than the extensive, all-or-nothing depiction of regulatory ‘capture’ that currently prevails within the IPE literature.