The quest for accountability in transnational regulatory networks: the case of the Basel Committee on banking supervision

This thesis focuses on the search for accountability processes related to the standard setting powers of a transnational regulatory network that operates in the highly complex and uncertain environment of global finance: the Basel Committee on Banking Supervision (BCBS).
The thesis draws upon and builds on two main resources: the academic literature from international law, political science, international relations and public administration about the concept of accountability and– as a theoretical framework – Niklas Luhmann’s idea of communication which suggests that communication is a selection process rather than a process of transmission. In this selection process the idea of meaning in the sense of a common understanding is paramount. The analysis focuses on the key milestones of the Basel Committee’s work: the Concordat, as well as the Basel I, Basel II and Basel III accords.
The thesis also draws on a qualitative original data set compiled by the author, made up of extracts of discussions of the Basel Committee’s work in the international financial journalistic press. Additionally, official documents and press releases from the BCBS were coded by classifying them into common themes (such as minimum capital standards or the delay on the implementation timetable of Basel III) and the thesis’ analysis assessed whether they formed part of an accountability process (i.e., whether they asked for an account, responded to an accountability claim, judged an accountability claim and referred to which consequences should follow the judgement). On the basis of this thematic analysis the thesis identifies five accountability processes in relation to the work of the Basel Committee based on communication. These revolve around the standards for minimum capital requirements in Basel II, the standards for debt exposures of banks lending to small and medium size enterprises, the over complexity of the Basel III accord, the alleged detrimental effects of the Basel accord for US banks, and the delay in the schedule to implement Basel III.
Drawing on Luhmann’s ideas about communicative events, the thesis develops a novel account of communicative accountability that explains accountability as the decentred and flexible communicative interaction between an accountor and an accountee whose communications have to resonate with an epistemic community. This epistemic community plays the role of a social system in which expectations about the exercise of regulatory powers of the Basel Committee are managed. The thesis argues that this process of communicative accountability can be empirically traced and that it is significantly facilitated by reliance on a shared language and expertise of a common professional community to which both the Basel Committee and a wider professional community belong to.
The thesis argues that while the concept of communicative accountability developed through the research can be used to identify processes which seek to render TRNs like the BCBS accountable, these processes may also lack sufficient legitimacy, in the sense of formal power from a recognized source such as a state or an international organization underpinning these accountability processes. Increased legitimacy matters because it would enhance certainty in an accountability process and therefore, help to identify more clearly the legitimate accountor and to uphold his or her authority to ask for the account. Hence, as a whole, this thesis contributes towards the quest for alternative ways of understanding and improving accountability mechanisms in relation to the exercise of regulatory powers by globalized regulatory institutions in a transnational sphere such as the BCBS.

Keywords: Accountability
Communication theory
Communication
Financial regulation
Advisor: Lange, B