Taking identity seriously: When identity meets regulation

Abstract

Financial stability is a public good. Banking regulation has a vital role to play in the provision and maintenance of financial stability. This article introduces a multiple identity approach to the regulation of the banking sector. It conceptualizes bankers and regulators sharing a common social identity with the rest of the society, namely taxpayer identity besides their respective banker and regulator identities. The article underlines the balance between two social identities, and the reasons why bankers and regulators cannot achieve a balance between the two. Finally, motivated by the multiple identity approach on the political economy of banking regulation, the article discusses two major policy recommendations for regulatory design, at least, to partially address the multiple identity problem.