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Banking on politics


  • Braun, Matias
  • Raddatz, Claudio


This paper presents new data from 150 countries showing that former cabinet members, central bank governors, and financial regulators are many orders of magnitude more likely than other citizens to become board members of banks. Countries where the politician-banker phenomenon is more prevalent have higher corruption and more powerful yet less accountable governments, but not better functioning financial systems. Regulation becomes more pro-banker where this happens more often. Furthermore, a higher fraction of the rents that are created accrue to bankers, former politicians are not more likely to be directors when their side is in power, and banks are more profitable without being more leveraged. Rather than supporting a public interest view, the evidence is consistent with a capture-type private interest story where, in exchange for a non-executive position at a bank in the future, politicians provide for beneficial regulation.

Suggested Citation

  • Braun, Matias & Raddatz, Claudio, 2009. "Banking on politics," Policy Research Working Paper Series 4902, The World Bank.
  • Handle: RePEc:wbk:wbrwps:4902

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    References listed on IDEAS

    1. R. J. Nicholls & S. Hanson & Celine Herweijer & Nicola Patmore & Stéphane Hallegatte & Jan Corfee-Morlot & Jean Château & Robert Muir-Wood, 2008. "Ranking Port Cities with High Exposure and Vulnerability to Climate Extremes: Exposure Estimates," OECD Environment Working Papers 1, OECD Publishing.
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    Blog mentions

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    1. Banker som intressegrupp
      by nonicoclolasos in Nonicoclolasos on 2009-07-26 20:26:35


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    Cited by:

    1. Jackowicz, Krzysztof & Kowalewski, Oskar & Kozłowski, Łukasz, 2013. "The influence of political factors on commercial banks in Central European countries," Journal of Financial Stability, Elsevier, vol. 9(4), pages 759-777.
    2. Chen, Pei-Fen & Liu, Ping-Chin, 2013. "Bank ownership, performance, and the politics: Evidence from Taiwan," Economic Modelling, Elsevier, vol. 31(C), pages 578-585.

    More about this item


    Banks&Banking Reform; Public Sector Corruption&Anticorruption Measures; Access to Finance; Corporate Law;

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