The construction of a regulatory risk device: an examination of the historical emergence and performative effects of the Basel Committee on Banking Supervision’s market risk framework

Claeys, Irene (2021) The construction of a regulatory risk device: an examination of the historical emergence and performative effects of the Basel Committee on Banking Supervision’s market risk framework. PhD thesis, London School of Economics and Political Science.

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Abstract

The thesis examines the historical developments in the conceptualisation of ‘market risk’ within the BCBS’ Minimum Capital Requirements. It traces the ideas and practices around market risk management, from within the growth of modern finance theory between the 1920-70s, to their assimilation and reformulations in Basel’s Market Risk Amendment, the Basel 2.5 Agreement and the Fundamental Review of the Trading Book. The central argument in the thesis is that the BCBS’ market risk framework does not primarily embody a set of objective measurement instruments, but rather constitutes a strategic device, understood as a material and discursive assemblage involved in constructing the financial markets. This means that the framework is both contingently constructed and capable of producing performative effects, in line with the theoretical commitments and objectives embedded within it. Moreover, in addition to treating Basel’s market risk framework as a strategic device, the thesis argues that it can also be reconceived as a technology of power. The framework’s interventions have, unsurprisingly, predominantly supported the commercial interests of the major trading banks. However, this is not a unidirectional story: despite the many ways in which Basel’s risk framework can be instrumentalised by powerful commercial actors, the thesis also demonstrates that it has the potential to be leveraged by a variety of actors to different and competing ends. Moreover, it is capable of reflexively reshaping the entities involved in its creation and ongoing reformulations. Thus, the thesis reveals the mutually constitutive nature between Basel’s market risk framework and the various banks and regulatory entities which brought it into being. In doing so, the thesis further shows that focusing on these relationships helps to uncover new explanations of contemporary banking developments, and suggests that leveraging the mechanics of Basel’s market risk framework might provide productive channels for interrupting these developments.

Item Type:	Thesis (PhD)
Additional Information:	© 2021 Irene Claeys
Library of Congress subject classification:	H Social Sciences > HG Finance K Law > K Law (General)
Sets:	Departments > Law
Supervisor:	Lang, Andrew and Humphreys, Stephen
URI:	http://etheses.lse.ac.uk/id/eprint/4437

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