An Evolving Legal Literature on “Misconduct Risk” and Bank Culture

Over the past ten years the study of misconduct in financial services institutions—and among banks and bankers in particular—has grown into a distinct field of legal academic analysis.1 To be sure, numerous academic disciplines have long-considered issues implicated by, or adjacent to, financial misconduct: management scholars examine organizational behavior and anthropologists outlay organizational cultures, to name just a few modalities of scholarly work that touch upon this subject. More recently, legal academics have begun to examine questions about bank misconduct and its relationship to culture.2

Legal research regarding ‘misconduct risk’ now stands as an independent, substantive subset in the legal literature on financial regulation. The law may well be a uniquely well-positioned vehicle for scrutinizing the risks associated with misconduct in the banking sector. Inherently inter-disciplinary, and often international, the law provides scholars the capacity to weave together many disparate bodies of work which all have bearing on misconduct risk: corporate law and governance, financial regulation, business ethics, and macroeconomics, to name just a few key areas. By drawing these bodies of work together, a legal researcher has some ability to shed new light on the core parameters of the problem of misconduct and culture in banks. This insert to Starling’s annual Compendium provides a summary map of where legal scholarship has, so far, guided a general understanding of misconduct risk. In doing so, it provides a high-level overview of my forthcoming book on conduct and culture in global banking. To get a general sense of the extant legal literature, one can consider it as evolving in two distinct—though iterative—phases.