Corporate Culture in Banking
12 Pages Posted: 23 Aug 2016 Last revised: 16 Dec 2017
There are 2 versions of this paper
Date Written: 2016
Abstract
Until recently, regulatory discourse has paid scant attention to the issue of organizational culture in banking. Yet ethical lapses and systematic weaknesses exposed in the 2007-09 financial crisis suggest that future policy dialogue is unlikely to ignore culture’s significance. Drawing from an approach developed in organizational behavior research, the author introduces a framework for diagnosing and changing corporate culture in a way that more effectively supports the bank’s growth strategy and induces behavior that enhances financial stability. The normative exercise, highlighting the tensions and trade-offs arising from competing organizational goals, is useful for bank leaders seeking to foster a specific culture. An examination of bank culture under the “Competing Values Framework” also offers insights for policymakers designing regulations that proactively address foreseeable problems.
Keywords: financial stability, risk management, managerial incentives, deferred cash compensation
JEL Classification: G21, G28
Suggested Citation: Suggested Citation