ABSTRACT
The title of this chapter might initially appear to suggest the covering of some relatively old academic ground. Banking, and in particular the ‘dichotomous framing’ of ‘bank-based’ and ‘market-based’ financial systems (Clift, 2007; Culpepper, 2005), have long been at the heart of the distinctions underpinning the varieties of capitalism literature. The patience of banks in bank-based systems, encouraged by the long-term relationships they form with non-financial companies (NFCs) shields NFCs from short-term market pressures. This allows, it is argued, long-term corporate investment decisions, worker involvement in company decision-making, effective training schemes (apprenticeship programmes), and stable long-term employment relations, including worker retraining and cooperative wage bargaining. Essentially, strategies can be followed that yield delayed returns, rather than short-term profit maximization. In contrast, in ‘market-based’ systems, banks are not providers of long-term capital and do not act as bulwarks against short-term financial market pressures on NFCs. Banks are predominantly short-term lenders and NFCs rely relatively more on equity and bond markets for finance.
