Corporate Culture in Banking

Abstract

In light of the erosion of public trust in banking and the massive fines imposed on banks since the 2007-09 financial crisis, the issue of culture in banking as an integral part of bank governance has loomed large, and is now occupying significant regulatory attention. This paper reviews the literature on corporate culture in Economics and Organizational Behavior and extracts the lessons from this research for the issue of bank culture. There is a discussion of 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. A strong culture in a bank can therefore be viewed as an off-balance sheet complement to financial capital on the bank’s balance sheet. The implications of the existing research on culture for senior bank executives and bank regulators and supervisors are synthesized and discussed.