Risk Culture in Banking by Alessandro Carretta;Franco Fiordelisi;Paola Schwizer;

Author:Alessandro Carretta;Franco Fiordelisi;Paola Schwizer;
Language: eng
Format: epub
Publisher: Springer Nature

Banca Carige

Market capitalization

Coefficient

Gross impact

Fine

Net impact (Reputation)

EW (–5; 5)

€1.514.97

–0.004860765

-€7.36

-€190

-€5.46

EW (–3; 3)

€1.514.97

–0.005025706

-€7.61

-€190

-€5.71

Source The authors’ own table

Again, the event study applied to Carige case, shows a reputational effect approximately of 5.5 million euros, when the sanction was “only” 1.9 million euros.

8.6 Conclusions

The hypothesis that poor risk culture could affect the way banks’ investors estimate the reputational impact on the business was confirmed applying an event study approach to a couple of Italian banks sanctioned for their distorted behaviour. Our hypothesis was that behaviour could have been better controlled and readdressed within an environment characterized by a higher risk culture intensity.

The implication of our outcomes is that both banks’ managers and regulators should concentrate on the risk culture issue through more substantial investments, not only based on rules and policies but also on a formal certification a compliant behaviour of human resources. Risk values should be shared by all the people involved in banking decision-making processes, at all levels, with the maximum commitment of the top managers and the board of directors , once they realize that leading risk culture performers create value and are more resilient in case of exogenous stress.

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