Banking Misconduct Risk, Conduct Cost and Financial Stability——The Focus Area of Global Financial Conduct Regulation and Risk Governance

Feng Qian; Gao Yang

doi:doi:10.16538/j.cnki.jsufe.2017.04.005

Abstract

In recent years, the issue of misconduct in international banking has been increasingly scrutinized by international regulatory authorities s. This paper defines the definition of misconduct risk, analyzes the characterization of conduct costs in international banking and the impact of misconduct risk on financial stability. It comes to the conclusions as follows, firstly, the main focus of the misconduct risk is consumers, and it emphasizes a series of negative externalities of conducts in terms of consequences; secondly, strategic and reputation risks are the likely incentives and consequences of misconduct risk; thirdly, operational, legal compliance and misconduct risks have both connections and differences; fourthly, the cost of international banking has got a great scale due to the issue of misconduct in recent years, and the conduct cost can roughly serve as a measure of bank ethics; fifthly, misconduct risk and related penalties may also have an immeasurable impact on financial stability. This paper is helpful for China’s banking industry and regulatory authorities to deepen the awareness of the misconduct risk. It provides references for standardizing the concept of conduct cost, assessing the level of banking conduct, and determining whether the risk control is effective. Misconduct risk governance helps to improve consumers’ welfare, prevent systemic risks and maintain financial stability.