Crisis and Punishment? Explaining Politicians' Appetite for Retribution in Post-Crisis Europe

Abstract

This article investigates the politics of holding bank executives accountable for banking crises. The post-2008 financial crisis was characterized by a significant variation in the endorsement of retributive justice. While some countries established special prosecutorial bodies and facilitated prosecutions, others relied on the existing prosecutorial mechanisms to seek out wrongdoing. The comparative experience of Iceland and Cyprus shows that the unfolding of the crisis shapes the appetite of politicians for retributive justice. With a banking collapse, politicians will be most proactive, as voters' demand for justice is high and the risks for the banking industry are minimal. With a severe yet negotiated crisis following a bailout/bail-in, politicians are more reluctant to endorse policies that may risk the recovery of the fragile banking sector.