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Game of Thrones: why Braavos is banking on regime change

Structural adjustment, Westeros style. HBO

Note: this article contains TV show plot spoilers up to and including the series 4 finale. It also features detail from the books (though no plot spoilers).

Wannabe king Stannis Baratheon’s unexpected arrival in the far north represented one of the most memorable moments in the Game of Thrones season four finale. The wildlings are routed, Stannis controls Castle Black, and things are set up nicely for next season as a disciplined and well-equipped army in the north should give the court machiavellis of King’s Landing a whole new set of problems. It may also give the unwitting people of Westeros some hope of a decent defence against the White Walkers once winter truly kicks in.

But we last saw Stannis several episodes ago, short of men and ships, going cap in hand to the Iron Bank of Braavos – what is he suddenly doing up north with a big army?

The TV show has consciously kept the money men lurking mostly in the shadows, exactly as the bank would like it. A powerful player which seems to want to influence Westeros’ game rather than participate in it, the Iron Bank has evolved into an institution that combines all the best, or worst, characteristics of an investment bank, the IMF and the Cosa Nostra.

Master spy Varys understands the nature of the bank’s power better than most. In an scene from the second season Varys tells Tyrion a riddle involving a king, a priest and a rich man who face a “humble sellsword”. Each makes an offer to the sellsword. “Who lives and who dies?” asks Varys. The punchline to Varys’ riddle, that power lies where we believe it to lie, applies all the more pertinently to the institution that all the kings and claimants of Westeros seem to fear, the Iron Bank.

Power lies where we believe it to lie.

Banking is a matter of controlling risk, among other things. In general, a borrower will know more than the bank about their own ability to repay a loan, hence the steps a bank will take to reduce its exposure by finding out as much as it can about a borrower’s ability to repay. (In theory, of course – as we know from experience that not all banks were diligent in their handling of risk). Microeconomics calls this a problem of asymmetric information. In a legally regulated market, there are a number of legal and contractual mechanisms for covering this risk, from credit scoring to deposit of collateral (“your home may be at risk”), and the bank can rely on the courts to enforce those debts.

But in the early modern world, and Braavos does seem to be based on Venice of the time, those institutional mechanisms were not so well developed. Enforcement, then, could be a matter of calling in the condottieri which literally translates to “contractors”; Westerosi equivalents would be Bronn and his fellow “sellswords”.

The Iron Bank, however, has developed far beyond those early moneylenders. In one of the creative anachronisms that litter the fantasy genre, it is now a pro-active changer of regimes, an institution dedicated to turning credit into control, leaving dead kings and structural adjustment programs in its wake.

A line from the books, not yet aired on television, illustrates this:

When princes defaulted on their debts to lesser banks, ruined bankers sold their wives and children into slavery and opened their own veins. When princes failed to repay the Iron Bank, new princes sprang up from nowhere and took their thrones.

The bank has lent out a considerable sum to the kings of Westeros and the situation in King’s Landing, as Davos points out, is not favourable to getting their money back. Tywin was at least capable of holding things together, but the prospect of a boy king with Cersei as regent is a recipe for continuing conflict. It’s not clear as of now what they know about Danaerys and her dragons, but given that she would have to transport her armies half way across the world, a closer alternative would be useful.

That the Iron Bank should seek regime change in Westeros through backing a rival is far from inconceivable. Lending to a government that is less than assiduous in keeping its repayments would be a terrible move unless you had the ability to ensure that someone more reasonable could be put into power.

Is Stannis set to be the Mario Monti of Westeros? Sky Atlantic/HBO

We have seen such moves in the real world too, where the hands of financiers have been discerned behind coups d’etat and changes of regime. Silvio Berlusconi’s resignation from the Italian premiership and the change of government that followed the financial crisis in Greece have both been put down to pressure from financiers, in this case those representing the IMF and Europe’s government and central bank.

This leads naturally to an interesting consideration that arose in the meeting between Stannis and head banker Tycho. The numbers upon which the Iron Bank prefers to base its decisions were unfavourable to say the least. Stannis had few men and fewer ships, not enough to take back the throne, and almost no productive capacity to support them.

However, Tycho is swayed not by numbers but by a story based on the characters of the people involved. A Westeros without Tywin’s influence is the chaos of a Cersei Lannister regency, and an Iron Bank already owed 3m gold dragons is exposed to more risk than it would like. Davos, using his own fingers as an example, convinces the bank that Stannis is good on his word, or at least better than the Lannister-led regime.

If you have ever been through a due diligence process, or a venture capital funding round, you will recognise that the characters of the involved parties and the story told about future developments and strategy are of as high importance to funders as the numbers themselves. The only difference here is that the stakes are relatively higher.

One final parallel between the Game of Thrones universe and our world lies in the founding of Braavos itself. The voluminous back story of the world takes in the Dragon Lords of Valyria, a slave owning empire in Essos. It was slaves escaping from Valyria that founded Braavos in a secret location, quietly building up a trading network. Trade, of course, requires finance to keep it going, hence the importance of the bank.

Here in Europe, banking was also a trade of outsiders: from the Jewish moneylenders of Venice to the dissenters of the 18th century such as Mr Barclay and Mr Lloyd. Merchant traders were not always valued, but they were necessary – an economy with no credit would see long-lasting deflations and under-investment in productive capacity such as forges, farming tools or ships.

Modernity owes its own debt to these outsiders who started in risky extra-legal finance and slowly moved into the establishment. Without them, our world could not have happened. Perhaps Stannis’ banker-backed power play will one day be seen as first step towards dragging Westeros out of the pre-industrial era and into the modern world.

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