Bank balance
Demystifying central banking governance in the European Union.
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Lucia Quaglia
Senior Lecturer in Contemporary European Studies
With the current financial turmoil, the role of central banks is more crucial than ever before. The European Central Bank is one of the world’s most important central banks and its work is fundamental to the monetary and financial stability of the European Union (EU).
My research sheds new light onto rather ‘aloof’ and sometimes poorly understood institutions, as well as on the functioning of economic and monetary union and the governance of the Euro. The recent period of financial instability makes it all the more important to understand how central banks work, what drives their policies, what is the impact of their policies and how they can be improved. My work involves an analysis of central banking governance before and after the establishment of the Economic and Monetary Union.
The main framework for my analysis is a ‘multi-level institutionalist approach’, articulated on three levels: the ‘systemic level’, which encompasses the European, transnational and international arenas; the ‘national level’, which considers the configuration of the domestic socio-economic and political environment in which each central bank operates; and the ‘micro institutional level’, which deals with the specific features of each central bank.
The research engages in a structure-focused comparison, using qualitative methods and concentrating on the Bank of England, the Bundesbank, the Banca d’Italia and the European Central Bank over the period 1979 to the present, with particular attention paid to the last decade. It examines the role of central banks as public-policy actors and self-interested bureaucracies active across all levels of governance. The analysis is grounded on in-depth and extensive primary research, enriched by interviews with policy-makers across Europe.
The study is based on an interdisciplinary approach, contributing to its innovative character. Indeed, a good understanding of economic arguments and familiarity with legal analysis is crucial in order to undertake research on the politics of central banking and financial regulation. This is necessary in order to grasp the political and economic effects produced by the actions and policies of central banks and financial regulators, as well as the influence of political and economic factors on the activity of central banks and rule-making in the financial sector. My book on central banking governance in the EU, together with my current work on financial services governance in the EU, aim to open new streams of political science research in areas that have traditionally been the domain of economists and lawyers.
The research on central banking governance in the EU stimulated my interest in financial services governance. I have recently been awarded funding from the European Research Council for a three-year project on ‘Financial Services Governance in the European Union: National, European and International Dimensions’. This will be the first-ever project to cover the politics and public-policy aspects of all financial services, including banking, securities trading, post trading activities (payment, clearing and settlement), financial conglomerates, insurance, corporate governance, corporate finance and company law, accounting and auditing standards, and EU trade in services.
