Regulatory Managerialism and Inaction

The chief goal of financial regulation is to protect our economy from the enduring harm inflicted by financial crises. Both the physical impacts of climate change itself, and the economic dislocations sure to accompany transitions away from carbon-intensive energy sources, could threaten the stability of our banking system. Significant social harms could flow from such a climate-inspired financial crisis, but the regulatory managerialist turn in banking regulation has unfortunately set regulatory agencies up for inaction in the face of such harms. Regulatory managerialism has been described as both a set of practices and an ideology designed to foreground private sector managerial approaches within the administrative state. In this Essay, I will explore how a key part of the banking regulatory framework known as “regulatory capital” has come to epitomize managerialist practices and ideology - and how that turn might be reversed so that banking regulation has a better chance of protecting the public from harm in the future.