| This dissertation is concerned with the institutional preconditions for the stable provision of long-term finance by national banking systems; postwar Germany and the US are drawn upon as case studies. In contrast with New Institutional Economics (NIE) inspired approaches, which focus on regulatory barriers to efficient contracting mechanisms between banks and firms such as the Glass-Steagall Act, this dissertation utilizes a systematic approach to explain differences in bank lending practices. This broader approach takes into account (1) the impact of labor regulation on the household sector's savings and investment behavior, (2) the impact of sectoral governance mechanisms on the default rate of nonfinancial companies and (3) the impact of "regulatory arbitrage" on the capacity of financial regulatory authorities to mitigate the speculative boom-credit crunch cycle through strict prudential regulation.;The greater capacity of the German banking system to provide long-term finance despite increasing international financial volatility in the 1970s and 1980s, it is here argued, is attributable to corporatist labor regulation, which has led to a high household demand for long-term, fixed-interest bank deposits and has hindered destructive price competition in sectors such as steel; furthermore, banking system stability has been promoted by strict, encompassing prudential regulation. The US banking system, in contrast, has responded to greater financial turbulence by shifting away from long-term, fixed interest rate finance to more contingent forms of lending such as variable-rate, medium term revolving credits. This shift can be explained in part by voluntarist labor regulation, which leads to a higher household preference for short-term assets and promotes destructive price competition in sectors with substantial overcapacity; furthermore, the tightening of prudential regulation to prevent banking system instability has been hindered by a fragmented financial regulatory system. |
