Abstract
This article identifies reputation-risk-relevant factors for banks, and the focus will be placed on the development of an indicator-based model for the assessment of reputation. Requirements and insights are based on a survey of credit institutions in Germany and Switzerland, which have been predominantly affected during the financial crisis by aptly nascent risks and which are thereby also partially affected even today. Reputation level can be considered as a temporally dynamical phenomenon which predominantly develops depending on the changes in the reputation drivers and expectations of the groups of stakeholders. This control parameter can be determined with the aid of Reputation Index Points (RIP). Efficient reputation risk management can, in the future, help prevent negative spillover effects from banks which face difficulties from the society or the taxpayers.
Highlights
The reputation of a bank refers to a public reputation of the bank in terms of competence, integrity, and trustworthiness, which results from the perception of the stakeholders
According to one reputation study, the following three banks belong to the group of 50 “most admired companies” in the world: JP Morgan Chase, Goldman Sachs, and Wells Fargo (Fortune, 2016b); at the same time, Industrial & Commercial Bank of China, China Construction Bank, Agricultural Bank of China, Bank of China, BNP Paribas, Fannie Mae, and Société Générale and seven—other—credit institutions belong to the group of the hundred largest companies in the world (Fortune, 2016a)
This inevitably leads to the fact that they react in different ways and manners in the case of a reputation-risk-relevant event and that they can—as the case may be—develop adequate measures
Summary
The reputation of a bank refers to a public reputation of the bank in terms of competence, integrity, and trustworthiness, which results from the perception of the stakeholders. In this case, represents an indispensable component of the integrated controlling cycle of a bank This impressively demonstrates the controversy pertaining to holocaust funds held on Swiss bank accounts at the beginning of 1990s, the collapse of the new market in Germany in 2001, the subprime crisis that started on the U.S real estate market and its effect on the reputation of many banks such as, for instance, UBS, the scandal with respect to Société Générale in France or the difficulties which the Italian Banca Monte dei Paschi di Siena is facing recently. Examples from the most recent past show the explosive nature with respect to the current issue of specific handling in the respective banking operation This is all the more due to the fact that cross-industry studies repeatedly reflect the proportionally lower reputation which has been awarded to the banks by the public. A holistic definition which would integrate the issue pertaining to the reputation, identification, assessment, and control of the risks to which the financial service providers are exposed in the global competition is obligatory (see Ogrizek, 2002)
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