The Perils of International Regime Complexity in Shadow Banking

Despite the role of shadow banking in the building up of the 2008 international financial crisis, the massive size of this sector, its cross-border nature, and the risks it entails for financial stability, the post-crisis regulation of shadow banking has remained rather feeble. Why? 

This book identifies a ‘game of shadows’, which unfolded recursively concerning the definition, monitoring, and regulation of shadow banking internationally. Thus, states, regulators, and private actors tended to cast light away from various parts of the shadow banking system – shadow banking was (re)fined over time, its measurement was narrowed down, lessening the (perceived) need for regulation.  

The playing out of such a game was facilitated by the international architecture for shadow banking governance, which is a ‘regime complex’ characterized by the presence of multiple institutions and elemental regimes governing a set of related issues. Indeed, shadow banking is a quintessential case for demonstrating the perils of international regime complexity, which magnifies problems that are endemic in governing global finance – namely, interstate competition, disagreement between technocratic bodies, and the power of the financial industry - while splintering solutions, due to the fragmentation of regulatory authority.  

Empirically, this book examines various elemental regimes concerning different aspects of shadow banking, namely: international standards for defining, measuring, and monitoring global shadow banking; international standards for shadow banking entities, including money market funds, hedge funds, and investment funds; international standards for shadow banking activities, such as securitization, securities lending, and repos; international standards for bank capital exposures to shadow banking.

Lucia Quaglia (DPhil Sussex, MA Sussex) is Professor of Political Science at the University of Bologna. Previously, she was professor at the University of York (2012-2017). She was awarded research grants and fellowships from the European Research Council, British Academy, Hanse-Wissenschafts Kolleg, University of Bremen, Fonds National de la Recherche du Luxembourg, Max Planck Institute in Cologne, Scuola Normale Superiore and European University Institute. She has published 9 books, 6 of which with Oxford University Press; guest co-edited 5 special issues of academic journals; and published more than 60 articles in refereed academic journals in the fields of public policy, political economy, and EU studies.

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