Maintaining the universal banking model – A study of institutional work in the endogenization of a failed transnational post-crisis financial market reform

This paper studies a failed attempt to introduce new regulation in the aftermath of the financial crisis: the rule-making process of the European Union's structural banking reform, where it was proposed to restrict the possibility to combine trading and deposit-taking activities for universal banks but where no regulation was finally adopted. Drawing on the theoretical concept of the endogenization of law, which highlights the role of the regulated in shaping the regulators' views, we study this case of transnational non-regulation. We mobilize institutional maintenance work to identify the strategies used by the regulated and their allies to shed light on the endogenization process. We find that maintenance work in the form of demonizing the reform proposals, mythologizing the accomplishments of the universal banking model and contextualizing in the setting of other regulations prevailed. Endogenization was reflected in the successive alignment of the EU proposals to the status quo and in the policy-makers' adoption of maintenance strategies earlier voiced by banks during the consultation process. We also show that national regulations implemented in France and Germany to influence the EU reform process – a strategy that we label "bottom-up enabling work" – provided an important reference point in the transnational discourse. Overall, our study provides insights into the interplay of maintenance work and endogenization in transnational regulatory settings.