This paper combines several novel datasets to analyze empirically the varieties of banking regulation across the European Union. The global and EU process of harmonization based on Basel Capital Accords reduces the variation in regulatory designs, yet this one-size-fits-all framework also deliberately preserves some scope for differentiation on the national level. We construct indices summarizing the patters of differentiation revealed by national choices of various options and discretions and test several hypotheses about clustering of the 28 EU countries. Although data indicate differences across the groups proposed by the varieties of capitalism literature, the most robust pattern of differentiation is between the advanced markets of the old EU member states and emerging markets of the new/post-communist members. The data also suggest that the difference can be explained by the desire of national authorities in the new member states to protect capital and liquidity in the local subsidiaries of foreign-own banks that dominate their banking sectors by relying on the more stringent and less discretionary interpretation of EU legislation. The variety of banking regulation thus seems to be driven by regulatory protectionism, which may pose a challenge to the EU commitment to the single banking market and the banking union.
