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accountability; financial regulation; privatization of risk


Financial regulators are key actors in a modern political economy given their role in determining the rules that govern savings and investments markets. This is an account of how two states, Britain and Germany, have sought to increase their oversight of financial markets by creating powerful new regulatory actors that are accountable to the political system. In both cases, this meant either ending or severe limiting the role of central banks and private actors as regulators. The aim is to show why domestic politics is key to understanding this major institutional change. Using a coalitional approach, this paper argues that politicians view the increased salience of financial regulation as a policy issue. The political response was triggered in large part by major changes in the composition of savings markets and the consequent "privatization of risk", where voters are increasingly dependent upon financial markets in order to determine their future financial security. It argues that, for center-left parties, creating the new regulators allowed the parties to portray themselves as protecting the interests of voters while also appealing to more traditionally left suspicions about the power of both central banks and markets.