Corporate Culture Enforcement Strategies in the Banking Industry

This report defines corporate culture as the shared standards, attitudes, values, and beliefs within an organization, emphasizing its crucial role in a business's success or failure. It examines the enforcement of corporate culture in the banking industry, focusing on regulatory actions designed to reduce moral hazard and improve financial stability. The report discusses various enforcement mechanisms, including written agreements, prompt corrective actions, and cease and desist orders, and analyzes their impact on banks' risk-taking behavior and overall culture. It also considers the challenges in measuring bank culture and identifying the causal effects of regulatory actions, ultimately questioning the extent to which regulatory measures can significantly alter bank culture and performance. This document is available on Desklib, a platform offering a wide range of study resources for students.

WHAT IS CORPORATE CULTURE AND
HOW IS IT ENFORCED?
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Contents
What is Corporate Culture?.........................................................................................................................3
Enforcement of Corporate Culture in Banking Industry..............................................................................3
References...................................................................................................................................................5
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What is Corporate Culture?
Corporate culture denotes the public standards, attitudes, values, and beliefs that organization’s
members and describe its outline. The outline of corporate is entrenched in an organization’s
structure, objectives, policies, and approaches to their customers, labor, investors and the society.
It is an essential component of success or failure of a business.
The concept of corporate culture arisen as a deliberately cultured reality in the 1960s alongside
correlated changes such as the social responsibility movement – itself the public hostility to
multinationals and conservationism values consumerism. The consciousness of corporate culture
is also a result of development where organizations found themselves competing in other
national culture so, the growth to the importance of management thinkers, and the dean of whom
was Peter Drucker. The organizations become aware of themselves as an actor on the social
scene, corporate culture becomes an important aspect of the business to watch and assess-
besides the “hard” assets measures, sales, profits and the return of shareholder (Thakor, 2018).
The term of corporate culture in banking has risen in current discussions as a topic of key
importance for speaks to two concerns: restoring public trust in the banking structure and
improving financial stability. Corporate culture has become a crucial part of banking matters.
Even though those engrossed in corporate culture issues have known this for a while, the latest
financial crisis has brought corporate culture to the front position for bank regulators to struggle
with. Banking is more than a group of strong subcultures, frequently planned around diverse
functions and business models (investment banking, commercial banking, operations, wealth
management, and technology) and even within different functions, these strong subcultures can
exist (Childress, 2018).
Enforcement of Corporate Culture in Banking Industry
Actions of enforcement are the main tool to reduce moral risk behavior for managers at all
banks, not only the sanctioned one. Do regulatory supervisor actions influence bank culture?
These supervisory actions impact the bank culture sufficient to cause make changes in their
behavior. That is the question investigated in this research. There are three key issues faced
empirically addressing this question.
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The first is describing various regulatory activities that are expected to have an influence on
undertakings and values of the bank. However, there are a large number of regulatory tools, but
here we discuss enforcement actions. Particularly, these actions are high visibility, especially
started as the crow flies by high-risk taking behavior at the bank or by a shortage of risk controls
(Cheema & Abbas, 2018).
The second one is producing objective estimations of the bank culture at the bank level.
Economists have been unwilling to talk about the culture as a determining factor of economic
phenomena due to the concept of culture is vague, and increases the number of measurement
issues in experiential research. On the other hand, in what has been considered the ‘cultural
revolution’, there has been a growing interest in determining culture accurately.
The third is associated with identification strategy. Especially, speaking both endogeneities and
the reverse connection is very crucial in experiential practice. For instance, find out a
performance of sanctioned bank’s post-section is undesirably associated to the bank’s pre-
sanction performance could be determined by a simple deterioration to the mean description in
place to have a casual understanding of sanctions on risk-taking.
There are different types of actions by which corporate culture can be enforced:
1. Written Agreements: these are between the two parties (bank and supervisor), who
found all counteractive methods together the bank needs to adopt.
2. Prompt Corrective Actions: these are deal out to banks that are considerably
undercapitalized. The objective of this act is to restore all supervisory capital levels.
3. Cease and Desist Orders: are independent actions enforced by the banking authority
after reaches to repair different unsafe and fallacious practices.
These enforcement actions lead sanctioned banks towards their risk-taking by reducing lending
and growing liquid assets and also modify the sanctioned banks’ corporate culture. However,
there look as if to be a spillover influence to cultural things at non-sanctioned banks, the impact
on the culture is comparatively lower and does not give the idea to be the vital outcome on their
risk-taking behavior or activities. At the end of the research, the result cast uncertainty on the
prospect that regulatory actions can affect bank culture adequate to cause substantial ups and
downs to their performance (Cheema & Abbas, 2018).
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References
 Cheema, A., & Abbas, M. (2018). Organizational Culture Impact on Banking Performance in
Presence of Organizational Commitment: A Case of Banking Sector of Pakistan. Retrieved
from http://serialsjournals.com/serialjournalmanager/pdf/1507030490.pdf
 Childress, J. (2018). Understanding corporate culture in banking. Retrieved from
https://www.criterionconferences.com/blog/government/understanding-corporate-culture-
banking/
 Thakor, A. (2018). Retrieved from
https://www.newyorkfed.org/medialibrary/media/research/epr/2016/epr_2016-corporate-
culture_thakor.pdf?la=en
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