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As of February 2023, no case has been reported in the U.K., either in the law reports or in the media, of a victim of COVID-19 suing in tort a person or organisation alleged to have caused the victim to contract the disease. This article considers the reasons this situation might have arisen. It provisionally concludes that the main legal reasons might lie in the applicable doctrines of factual causation and goes on to discuss whether uncertainty in those doctrines should be resolved in the courts.

Banking Union was a major policy response to the financial crisis that began in 2007 and the subsequent Eurozone crisis. Moral hazard has frequently been presented as a major cause of these crises. Therefore, Banking Union can be understood as a response to moral hazard in relation to banks and sovereigns. Yet, moral hazard was an acknowledged and supposedly managed problem prior to these events. Paradoxically, moral hazard has been used to justify contradictory policy options to safeguard European financial system stability, such as decentralized institutional arrangements for banking supervision but also a centralized system coordinated by the European Central Bank (ECB). To address this paradox, this paper investigates moral hazard as a political concept. Based on a comparison of how central bankers from the Bundesbank and the ECB understand and use the moral hazard concept, this paper argues that moral hazard is closer to the realm of politics than expertise.

Chapter 1 begins by introducing the puzzle of bank structural reform. In the wake of the global financial crisis, the problem of too-big-to-fail banks proved to be one of the most difficult and divisive to resolve. Unlike most areas of post-crisis banking regulation, there was little attempt to coordinate efforts to address the issue through bank structural reform—namely, restrictions on banks’ ability to engage in higher-risk trading activities through structural separation and/or prohibitions on proprietary trading. The central aim of the book is to understand why six jurisdictions with banking systems that are among the world’s largest pursued such divergent approaches, despite significant political pressures to engage in structural reform. The chapter reviews the important similarities and differences across our six cases—the US, UK, EU, France, Germany, and the Netherlands—to justify our comparative method. Next it summarizes the limitations of existing scholarship in this area as a justification for the book. The chapter then assesses alternative explanations rooted in political economy and political science, concluding that none provides an adequate account of regulatory variation in bank structural reform. The final sections provide a detailed summary of our argument, explain the rationale for the book, and include an overview of the structure.

Chapter 3 places bank structural reform into the wider context of bank regulatory reform since the crisis. We analyse how a range of regulatory responses have or might have impacted on too-big-to-fail banks principally by reducing their size and higher-risk activities. We group these responses into five categories: 1) conditions attached to government financial support, notably related to deleveraging; 2) revenue-raising regulation and fiscal policy, including bank levies, transactions taxes, and resolution funds; 3) the reinforcement of bank regulations concerning credit rating agencies, remuneration practices, capital and liquidity requirements, and bank resolution; 4) bank governance and transparency, including internal risk management, stress testing, and reporting requirements; and 5) strengthened bank supervision through new macroprudential policy instruments. Our main argument is that the large majority of these measures had only a limited effect in addressing the too-big-to-fail problem. We therefore devote the rest of the book to analysing the one set of measures designed explicitly to address the issue: bank structural reform.

Chapter 8 considers the curious case of no reform in the Netherlands. Conditions appeared ripe for change, not least because of the size of the Dutch banking sector and the scale of the country’s bank bail-outs, but also because of the early support from several political parties and prominent political figures—including the Finance Minister during the crisis, Wouter Bos. We argue that the Dutch case represents a clear example of conflict contraction, resulting from two factors. First, the unified and disciplined Dutch banking industry was able to leverage its cooperative financial power successfully to shape the bank reform agenda more generally, and to marginalize discussions on structural reform in particular. For example, the sector established its own commission in November 2008, chaired by senior bank executive Cees Maas, which recommended a voluntary ‘code’ to change internal bank culture. Second, the Dutch government depoliticized banking reform through venue shifting to two ad hoc commissions—the De Wit Commission in 2009, and the Wijffels Commission in 2012—which narrowed engagement and largely echoed industry’s concerns about ringfencing. The outcome was that the government was able successfully to deflect blame away from the phenomenon of too-big-to-fail banks.

Chapter 9 places our country-level analysis into the context of EU initiatives on banking reform. This examination provides further corroboration for our explanatory framework in two respects. First, in 2012 the European Commission sought to mobilize support for reform by delegating the issue to an independent ‘High-Level Expert Group’, headed by then Finnish central bank Governor, Erkki Liikanen. This exercise in venue shifting led the Commission to adopt a less ambitious version of the group’s recommendation for bank trading activities to be located in a separate legal entity as the basis for its own draft regulation. Second, the EU financial industry was able to leverage substantial cooperative financial power to reduce momentum for reform: through powerful national banking associations working closely with reform-sceptic governments in the EU Council of Ministers; and through influential European banking associations with well-established ties to the Commission and European Parliament. Where the EU differs from our country cases, however, is in the uniquely fragmented nature of the polity, which generated additional obstacles to reform. In particular, opposition from left and Green MEPs to the repeated dilution of the Liikanen Group’s proposals in response to pressure from the Council of Ministers and industry contributed to stalemate, and the eventual abandonment of the draft regulation on structural reform in 2017.

The problem of banks being ‘too-big-to-fail’ was the defining regulatory issue of the global financial crisis. However, attempts to tackle the problem by separating retail banking from higher-risk trading activities—known as structural reform—proved to be highly divisive and contributed to significant regulatory divergence. Our book explains this variation by examining the politics of bank structural reform across six key jurisdictions: the United States, European Union, United Kingdom, France, Germany, and the Netherlands. Integrating political economy and public policy approaches, we develop a novel ‘comparative financial power’ framework to analyse how financial industry influence is mediated by two factors: first, whether bank lobbying is unified and centralized (cooperative financial power) or divided and fragmented (competitive financial power); and second, policy makers’ use of venue shifting to depoliticize contentious policy issues. The book explains that the US and UK governments implemented major reforms because the banking industry was divided and faced significant opposition: but that venue shifting to an independent committee led to durable reform in the UK, while political polarization in the US contributed to contested reform. In contrast, the French and German governments balanced unified bank lobbying and political pressures to act by pursuing limited symbolic reforms; the Dutch government deflected the issue through delegation to multiple commissions (no reform); while political stalemate at the EU level resulted from early venue shifting and concerted pan-European bank lobbying. The book makes a major contribution to scholarship on the political economy of finance and business power.

Chapter 2 develops our theoretical framework. It begins by reviewing explanations in international and comparative political economy, and theories of business power, to explain why they offer an inadequate account of patterns of bank structural reform across advanced economies. To address these limitations, we turn to the literature on interest group lobbying, which points to the importance of the relational context and ‘financial unity’ as key determinants of financial power, and from which we derive our first hypothesis about variation in the stringency of structural reform. This section also draws on theories of interest representation to specify our empirical expectations about cross-national variation, differentiating between ‘competitive’ and ‘cooperative’ forms of financial power. Next, the chapter considers the institutional context of financial power, reviewing theories of agenda setting and venue shifting to derive our second hypothesis about the (de)politicization of banking reform. The final section pulls these insights together by presenting our comparative financial power framework: combining the two explanatory variables—interest group lobbying and venue shifting—to produce a two-by-two typology of different banking reform outcomes: durable, contested, symbolic, and no reform.

Chapter 4 presents our first case study, analysing the Obama administration’s late conversion to the cause of bank structural reform in the US. This policy shift culminated in the surprisingly stringent ban on proprietary trading by banks (the ‘Volcker Rule’) in July 2010, but also led to a lengthy and often tortuous process of implementation. We argue that this significant but highly contested outcome was a consequence of two key features of the process. First, financial industry lobbying was highly fragmented and frequently divided, giving rise to powerful dissenting voices from within the industry (i.e., competitive financial power). Large Wall Street banks also faced concerted opposition from a powerful pro-reform coalition of consumer and activist groups that maintained pressure on Congress. Second, in the absence of venue shifting through which to build a bipartisan consensus, structural reform was highly politicized and shaped by the balance of power in a deeply polarized Congress. Hence, we show that the Volcker Rule came under sustained attack as Republicans, supported by large Wall Street banks, sought to delay and disrupt the rule-writing process using a variety of political, bureaucratic, and legal channels. This culminated in the Trump administration’s attempted repeal of the proprietary trading ban in 2017, which succeeded in relaxing some provisions for smaller banks.