A new era of conduct supervision: consequences, challenges, and opportunities

Governance, Risk management and oversight, Regulation and supervision
/ Banking

Bank Governance Leadership Network, March 2014

Research from the London School of Economics suggests that in the five years since the crisis, conduct-related fines and charges have exceeded £148 billion for 10 of the largest global banks. New allegations of bank misconduct continue to emerge. Conduct has negatively affected bank profitability and shareholder returns, and conduct issues have raised prudential concerns regarding capital adequacy, tarnished the reputations of individual banks and the sector overall, and eroded trust in the financial system. To address the issue, banks have invested heavily in increased compliance and controls, withdrawn questionable products and services, and improved product approval processes and sales practices, but increasingly intense conduct supervision continues to create challenges for banks, regulators, and consumers. 

Bank Governance Leadership Network (BGLN) participants, including non-executive directors and executives from global banks, met with senior regulators in London on February 18, 2014 to discuss this new era of conduct supervision, practical approaches for addressing conduct, and opportunities for increased cooperation. This ViewPoints captures the essence of the meeting dialogue along with prior conversations with bank and regulatory leaders in the BGLN. We hope that it serves as a catalyst for further action.