Regulated organizations: responding to and managing regulatory change

This thesis explores how regulated organizations respond to and manage regulatory change. It uses a case study of the significant wave of reforms to financial regulation that followed the financial crisis in 2007-8, reforms which created a moment of great uncertainty and complexity for banking organizations. Using a combination of discourse analysis on banks’ publicly available documents and semi-structured qualitative interviews with 22 members of banking organizations in the UK, this thesis examines how a sample of banks responded to and managed the changes in their regulatory environment. This thesis found that the uncertainty associated with unclear regulatory rules, unspecified regulatory expectations and shifts in the cognitive underpinnings of financial regulation exacerbated existing tensions between market and regulatory objectives within banks. Managing these tensions required an ongoing process of negotiation and settlement between organizational actors who were ‘institutional agents’ of market and regulatory logic respectively. This thesis found that that the balance in the use of these logics changed over time and argues that this is partly due to considerations of legitimacy relative to the external political and economic context, but is also related to the degree of uncertainty and the power and status afforded to the internal representatives of market or regulatory logic. Regulatory interactions between the banks and their supervisors were found to be a critical site where legitimacy criteria are communicated and regulatory professionals construct the bank’s regulatory identity. Finally, this thesis argues that when regulation is in a continual state of flux, possibilities for meaningful behavioural changes are reduced. At the same time, however, continuous regulatory change demanded greater organizational attention, suggesting an acceptance on behalf of the banks that regulatory change had become part of ‘business as usual’