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The UK and Multi-level Financial RegulationFrom Post-crisis Reform to Brexit$
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Scott James and Lucia Quaglia

Print publication date: 2020

Print ISBN-13: 9780198828952

Published to Oxford Scholarship Online: February 2020

DOI: 10.1093/oso/9780198828952.001.0001

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In Search of Stability: Bank Capital and Liquidity Requirements

In Search of Stability: Bank Capital and Liquidity Requirements

(p.52) 4 In Search of Stability: Bank Capital and Liquidity Requirements
The UK and Multi-level Financial Regulation

Scott James

Lucia Quaglia

Oxford University Press

Following the financial crisis, UK preferences shifted decisively in favour of trading up bank capital and liquidity requirements. To reassure voters, elected officials intervened in the regulatory process by strengthening the domestic institutional architecture for banking regulation. Financial regulators leveraged this political support to overcome resistance from the financial industry, but also pushed for international/EU harmonization of capital requirements to avoid damaging the UK’s competitiveness. Internationally, UK regulators therefore acted as pace-setters and exerted significant influence over the design of the Basel III Accord. However, at the EU level, the UK was forced to act as a foot-dragger by prolonging negotiations over the Capital Requirements Directive IV (CRD IV) in an attempt to resist Franco-German efforts to water down the rules. But UK negotiators were more successful in leveraging domestic constraints to oppose the Commission’s attempt to impose the ‘maximum’ harmonization of bank capital.

Keywords:   bank capital, banking regulation, liquidity, pace-setters, Basel III Accord, Capital Requirements Directive IV

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