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The “day after” Basel 2: do regulators comply with banking culture?

Author

Listed:
  • Alessandro Carretta
  • Vincenzo Farina
  • Paola Schwizer

Abstract

Purpose - The purpose of this paper is to measure the cultural fit between supervisory authorities and banks, considering cultural gaps as possible stumbling blocks for effective supervision. Design/methodology/approach - The paper uses a text-analysis approach. The methodological assumption is that the analysis of culture is closely connected to the analysis of the type of language used by the members of an organization. To this aim, a cultural survey was developed in order to compare cultures of Bank of Italy, Italian banks, and Basel Committee during the years 1999 and 2004. Findings - The results highlight several significant, but decreasing, cultural gaps relating to important issues for banks, such as risk, disclosure, change, and innovation. Practical implications - The evidence and the measurement of cultural gaps are useful elements for the identification of change actions by supervisors and banks. In fact, identified gaps could be detrimental for an effective supervision and could be a source of regulatory risk for regulated banks. Originality/value - This paper focuses on an evolutionary aspect of text analysis, concerning standardization in the treatment of data, combined with the use of standard vocabularies. This allows a greater comparability of the output of the various studies, enabling us to further refine the methodology. The analysis model includes the definition of several concepts – such as “risk” and “disclosure” – at the base of the development of banking culture and representing basic goals of prudential regulation.

Suggested Citation

  • Alessandro Carretta & Vincenzo Farina & Paola Schwizer, 2010. "The “day after” Basel 2: do regulators comply with banking culture?," Journal of Financial Regulation and Compliance, Emerald Group Publishing, vol. 18(4), pages 316-332, November.
  • Handle: RePEc:eme:jfrcpp:v:18:y:2010:i:4:p:316-332
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    References listed on IDEAS

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    1. Carretta, Alessandro & Farina, Vincenzo & Schwizer, Paola, 2005. "Banking regulation towards advisory: the “culture compliance” of banks and supervisory authorities," MPRA Paper 8302, University Library of Munich, Germany.
    2. Barth, James R.*Caprio,Gerard*Levine, Ross, 2001. "The regulation and supervision of banks around the world - a new database," Policy Research Working Paper Series 2588, The World Bank.
    3. Charles Goodhart, 2000. "The Organisational Structure of Banking Supervision," FMG Special Papers sp127, Financial Markets Group.
    4. Gregory E. Elliehausen, 1998. "The cost of banking regulation: a review of the evidence," Staff Studies 171, Board of Governors of the Federal Reserve System (U.S.).
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    Citations

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    Cited by:

    1. Margaret Armstrong & Guillaume Cornut & Stéphane Delacôte & Marc Lenglet & Yuval Millo & Fabian Muniesa & Alexandre Pointier & Yamina Tadjeddine, 2012. "Towards a practical approach to responsible innovation in finance: New Product Committees revisited," Journal of Financial Regulation and Compliance, Emerald Group Publishing, vol. 20(2), pages 147-168, May.
    2. Wendy Mason Burdon & Mohamed Karim Sorour, 2020. "Institutional Theory and Evolution of ‘A Legitimate’ Compliance Culture: The Case of the UK Financial Service Sector," Journal of Business Ethics, Springer, vol. 162(1), pages 47-80, February.
    3. Christin Richter, 2014. "Development of a Risk Culture Intensity Index to Evaluate the Financial Market in Germany," Proceedings of FIKUSZ '14, in: Pál Michelberger (ed.),Proceedings of FIKUSZ '14, pages 237-248, Óbuda University, Keleti Faculty of Business and Management.
    4. repec:hal:journl:halshs-00699985 is not listed on IDEAS

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