(S)tra(te)gic banking Europe’s geopolitical turn and the contradictory trajectory of TBTF banks

Abstract

Numerous regulatory measures aimed at reducing the size and power of European global banks emerged after the Great Financial Crisis (GFC), yet banks remain as large as in 2008. Despite their scale, they repeatedly experience (near) crises and underperform relative to their US competitors. IPE accounts explain the persistence of ‘Too Big To Fail’ (TBTF) banks through their structural power, while CPE approaches emphasise regulatory politics and institutional variation. We argue that both perspectives underestimate the role of geopolitical ambitions and financial hierarchies within global markets in shaping European banking outcomes. Connecting the persistence of TBTF banks to Europe’s geopolitical turn, we analyse European banks’ capacity to deliver on ambitions of strategic autonomy and financial sovereignty. We develop the concept of (S)tra(te)gic banking to capture this trajectory: a state–bank nexus that seeks to project power in global markets while maintaining traditional domestic functions. However, given the structure of global finance, this dual ambition produces contradictory outcomes. European banks are neither globally competitive on par with US banks nor reliably able to support domestic economic functions. We show that their position within dollar-centred financial hierarchies renders Europe’s geo-financial strategy inherently contradictory.