Thoughts on Reputational Risk and Adverse Selection in Banking

• Authors: Walter Ingo
• Languages of publication: EN

Abstracts

EN

The epic financial crisis of a few years ago left behind massive damage to the process of financial intermediation, the fabric of the real economy, and the reputation of banks and bankers. Even today, some five years later, little has happened to restore financial firms to their former glory near the top of the reputational foodchain in most countries. [...] What next? Here are some options: Tougher due diligence on who gets to do what in banking businesses that are prone to conflicts of interest and compliance issues. Zero-tolerance telegraphed by senior management and boards. Targeting civil and criminal enforcement actions on the specific individuals involved (those closest to the action) instead of those farthest away (shareholders). Compensation schemes that handcuff bankers to the future financial performance of their firm (already well advanced at most banks). Boards' willingness to leave on the table some incremental financial performance to achieve reduced regulatory and reputational risk, admittedly a tough balance to execute. None of this is easy, and there are no free lunches. Hard to prove, but the payoff could be handsome indeed. (fragment of text)

Keywords

EN

Financial crisis, Banking sector, Bank image, Corporate governance, Professional ethics

PL

Kryzys finansowy, Sektor bankowy, Wizerunek banku, Ład korporacyjny, Etyka zawodowa

• Publisher: Bankowy Fundusz Gwarancyjny
• Journal: Bezpieczny Bank
• Year: 2014
• Issue: 2(55)
• Pages: 7-10

Contributors

author

Walter Ingo

• New York University Stern School of Business, USA