Non-financial determinants of financial instability on the example of the North American banking sector and their significance in the context of the 2023 crisis in the USA

Abstract

The history of banking crises shows their above average occurrence in the United States. The article outlines the reasons for this state of affairs (including geographical, demographic and political conditions). It is shown that these factors led to the emergence of a fragmented sector characterized by supervisory and regulatory dualism. At the same time, it is shown that in neighbouring Canada, where the banking sector evolved along parallel lines, different socio-political conditions resulted in a different structure and greater resistance of the banking sector. The course of the regulatory cycle in the USA (twentieth and twenty-first centuries) is also sketched and related to the described conditions, in particular political and social ones. The impact of these circumstances and conditions (especially the fragmentation of the sector and supervisory dualism) on pre-crisis banking regulation and supervision is also outlined, along with the course and scale of the banking crisis of 2023. The potential consequences of the crisis are described, including the presentation of proposed solutions to the problems that (directly) contributed to its outbreak. However, these solutions do not touch the core of the identified problems. Therefore, one cannot rule out the occurrence of another banking crisis in the future.