Organisational Culture and Bank Risk

35 Pages Posted: 9 Mar 2021

See all articles by Joel Suss

Joel Suss

Bank of England

David Bholat

University of Essex

Alex Gillespie

London School of Economics & Political Science (LSE)

Tom Reader

London School of Economics & Political Science (LSE)

Date Written: March 5, 2021

Abstract

Existing research has largely relied on employee surveys to measure organisational culture despite the significant shortcomings of this approach. We use multiple, unobtrusive sources of data to gain rich insights into bank culture without ever having to ask employees to ‘show us your culture’. Our measure is based on 20 individual indicators from six different sources, including information on internal fraud cases, customer complaints, and the quality of regulatory submissions. We use this data to investigate the hypothesised relationship between organisational culture and bank risk. We find robust evidence that poor culture leads to substantially higher risk, demonstrating the importance of bank culture for prudential outcomes.

Keywords: Culture, bank risk, supervision

JEL Classification: G21, G30, L25, Z1

Suggested Citation

Suss, Joel and Bholat, David and Gillespie, Alex and Reader, Tom, Organisational Culture and Bank Risk (March 5, 2021). Bank of England Working Paper No. 912, Available at SSRN: https://ssrn.com/abstract=3801088 or http://dx.doi.org/10.2139/ssrn.3801088

Joel Suss (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

David Bholat

University of Essex ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

Alex Gillespie

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Tom Reader

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

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