In October last year we issued a Deeper Dive report, “The Costs of Misconduct.”1 Financial sector regulators around the world, we observed, are increasingly signaling that they will take a tougher stance on corporate misconduct — and not just where wrongdoing is deliberate, but also where institutions are deemed to be negligent. Individually, these latter events generate smaller fines than when intentional malfeasance is found. But, in the aggregate, they likely cost the industry and its stakeholders far more.
“Is conduct risk the new prudential risk?” Dubai Financial Services Authority CEO Ian Johnston poses this question in an In Focus article contributed here. [See the In Focus Article Is Conduct Risk the New Prudential Risk?] Prudential supervisors are tasked with overseeing the safety and soundness of the firms under their purview and, to the extent appropriate, safeguarding that safety and soundness in the interests of depositors and customers. “But could the actions of the regulator itself pose a risk to the financial standing and even the soundness of an institution?” he asks, suggesting that the potential fines and other liability exposures to which firms are now subject may themselves represent risk to a firm’s soundness. “In recent years, the quantum of fines meted out in the financial services sector has grown significantly and firms are increasingly having to factor the consequences of potential misconduct into their financial risks.”
This content is available to both premium Members and those who register for a free Observer account.
If you are a Member or an Observer of Starling Insights, please sign in below to access this article.
Members enjoy full access to all articles and related content from past editions of the Compendium as well as Starling's special reports. Observers can access a limited number of articles and may purchase articles on an ala carte basis.
You can click the 'Join' button below to become a Member or to register for free as an Observer.
Join The Discussion