The “day after” Basel 2: do regulators comply with banking culture?

Abstract

Purpose

The purpose of this paper is to measure the cultural fit between supervisory authorities and banks, considering cultural gaps as possible stumbling blocks for effective supervision.

Design/methodology/approach

The paper uses a text‐analysis approach. The methodological assumption is that the analysis of culture is closely connected to the analysis of the type of language used by the members of an organization. To this aim, a cultural survey was developed in order to compare cultures of Bank of Italy, Italian banks, and Basel Committee during the years 1999 and 2004.

Findings

The results highlight several significant, but decreasing, cultural gaps relating to important issues for banks, such as risk, disclosure, change, and innovation.

Practical implications

The evidence and the measurement of cultural gaps are useful elements for the identification of change actions by supervisors and banks. In fact, identified gaps could be detrimental for an effective supervision and could be a source of regulatory risk for regulated banks.

Originality/value

This paper focuses on an evolutionary aspect of text analysis, concerning standardization in the treatment of data, combined with the use of standard vocabularies. This allows a greater comparability of the output of the various studies, enabling us to further refine the methodology. The analysis model includes the definition of several concepts – such as “risk” and “disclosure” – at the base of the development of banking culture and representing basic goals of prudential regulation.

Citation

Carretta, A., Farina, V. and Schwizer, P. (2010), "The “day after” Basel 2: do regulators comply with banking culture?", Journal of Financial Regulation and Compliance, Vol. 18 No. 4, pp. 316-332. https://doi.org/10.1108/13581981011093659