Failing Forward in Financial Stability Regulation

Abstract

This chapter asks three questions: To what degree has the European financial and debt crises spurred new policies and purposeful action toward improved financial stability regulation? Secondly, how can we theorize the processes that link crises and policy? And thirdly, we ask if what has been achieved is likely to be sufficient to avoid another crisis? We measure policy change along three dimensions: level of aggregation, level of governance, and functional scope, and find significant change along the two first. This is explained by the “failing forward plus learning” framework that we develop. We do, however, find enough chinks in the EUs newly erected armour to predict that processes of failing forward will continue. Thus, we conclude that muddling through best describes the EU’s post-crisis efforts in financial stability regulation.