Caner Bakir: Bank Behaviour and Resilience: The Effect of Structures, Institutions and Agents

Caner Bakir Bank Behaviour and Resilience: the Effect of Structures, Institutions and Agents Palgrave Macmillan, Basingstoke, 2013, pp. 214, $109. Lina Rethel & Timothy J. Sinclair The Problem with Banks Zed Books, London, 2012, pp. 147, $21.80. There is a widespread view, in the wake of the global financial crisis, that the banking system needs to come under critical scrutiny, if not comprehensive regulation. These two books are among the contributions from political economists, seeking to analyse what banks do and under what conditions and regulatory arrangements they are most likely to operate without creating major social damage. In both cases, the primary focus is on systemic stability at a macroeconomic scale, rather than on more 'micro' level concerns about individual banks' lending practices that periodically generate charges of 'unconscionable behaviour'. The two books address similar themes but within different analytical frameworks and with different styles. Their shared concern is to cast light on the behaviour of the banking sector and how it fits into the broader functioning of the economy--for better or worse. Caner Bakir's book pays particular attention to Australia, based on the research he did for his PhD at Monash University. This adds to its local interest, but his analysis of the Australian situation also should be of international interest because the financial turmoil here was so much less than in most other capitalist nations. Can Australia be regarded as a role model for monetary stability? Was it's relatively sound banking system or it's more effective structure of banking regulation partly responsible for avoiding the worst excesses of the GFC, as conservative financial analysts and journalists have tended to assume? Bakir holds the Australian banking system to be the leading example of 'what went right?' during the GFC. Indeed, the sector was more resilient than virtually any other OECD nation and was spared the bank collapses that were so devastating in other nations (Lehman Brothers, Bear Sterns and Merrill Lynch in the US and HBOS, Northern Rock and Bradford & Bingley in the UK, for example). Bakir asks 'why did the Australian banks, like Canadian and Japanese banks, not take on the increased risk that led to the downfall of so many well-known institutions in the US, UK and Germany?' (p4). He argues that this is not explicable in terms of a 'varieties of capitalism' (VOC) analysis that seeks to differentiate between liberal market economies that have capital market-based financial systems ('impatient capital') and coordinated market economies that have bank-based financial systems ('patient capital'). His preferred conceptual framework emphasises 'how interdependent and dynamic processes among structures, institutions and agents affect the nature of bank behaviour, financial system resilience and institutional outcomes' (p6). He concludes that 'the key variable affecting institutional outcomes such as prudential regulation and competition regulation is domestic political economy which still continues to shape the impact and trajectory of financial globalisation. In other words, individual state regulation still matters today' (p169). …

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