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Part IV Conduct and Culture, 19 Managing Conduct Risk: From Rules to Culture

Antonella Sciarrone Alibrandi, Claudio Frigeni

From: Governance of Financial Institutions

Edited By: Danny Busch, Guido Ferrarini, Gerard van Solinge

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2023. All Rights Reserved.date: 30 September 2023

Regulation of banks — Investment business

This chapter examines the concepts of conduct risk and misconduct risk. Despite the attention paid to this subject by regulators, commentators, and others, there is some confusion about what conduct risk specifically is. Conduct risk is generally viewed as the risk associated with illegal or unethical conduct engaged in by financial firms and their employees. Beyond this broad definition, different institutions have focused their attention on specific areas or activities in which misconduct may occur and attempted to understand the drivers of conduct risk in these areas or activities. Taking into account that the main objective should be the prevention — rather than punishment — of misconduct, the international debate on conduct risk has begun stressing the importance of fostering robust firm cultures, in which customer satisfaction and ethical behaviour would become widespread among financial firms and their employees.

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