A Culture of (Global) Compliance in International Banking

A Culture of (Global) Compliance: How Banking Differs (and Stays The Same) Around the World

When it comes to banking and financial institutions, despite differences in regulations and currency, one common thread that brings together all wealth managers and banks around the world is trust. In these times of a global financial crisis and while transitioning into a new generation of consumers, trust in wealth management is crucial. Wealth managers need to address three critical angles: establishing a culture of transparency, customer value, and shareholder value. Doing so can enable long-term growth between the financial sector, shareholders, and clients, providing a simpler and more reliable way to navigate future disruptions.

We’ve previously written about the importance of trust in international business and why it’s vital for success. In the financial sector especially, “the unknown” can create fear and mistrust, leading to unsustainable losses. Among banks, establishing trust can help connections become relationships and turn opportunities into revenue. In this post, we’ll look at how banks worldwide foster trust among customers and shareholders by establishing a culture of compliance, and how banks around the world are doing this:

Risk management

Cultural differences mean varying perceptions of risk. At the end of the day, however, all banks and financial institutions should be averse to risk lest they suffer losses and lose customers. This is why prudential risk reporting is being standardized across the EU through the Basel IV framework, with the US and the UK following suit. Although the implementation of this framework depends on each country’s unique local jurisdiction, regulations such as Basel IV ensure that banks and financial institutions meet their goals beyond regulatory compliance to enhance growth, competitiveness, and profitability. This is achieved by effectively managing their organization and data. For European banks, for example, this may mean an increased focus on capital planning to satisfy mandates and yield long-term benefits.

Ethical Behavior in A Culture of Global Compliance in international banking

Along with regulatory compliance, banks also have a responsibility for ethics compliance. Studies have shown that the success of banking services is inevitably connected to their ethics. As banks deliver financial and monetary services to stakeholders and customers, ethical factors cannot be ignored. One of the ways banks and financial institutions have been prioritizing their commitment to ethics is through prioritizing gender diversity. For example, European banks with more female members on their boards are more likely to be growth-oriented. The same is evident in US banks, as an expansion of gender diversity within bank boards has been found to enhance a bank’s performance.

Crisis management

Much like risk, crisis response can vary depending on the country the financial institutions belong to. While some global crises are universally felt, other sociopolitical conditions can vastly differ depending on the location. Banking crises can impact both advanced and emerging economies, as shown by the latest US financial crisis. During a banking crisis, governments play a significant role in mitigating the impact of an emergency to help financial sectors recover. During Sweden’s economic situation in the 1990s, for instance, the Swedish government stepped in by nationalizing two of the country’s largest banks, allowing them to provide equity to ailing borrowers and restructure defaulting companies. This effective crisis management cost the Swedish government less than 2% of its GDP, with some estimates placing the number close to zero.

Ultimately, A Culture of Global Compliance in international banking is essential for banks and financial institutions to foster trust in these disruptive times. While banks and governments worldwide may pursue compliance in different ways, the focus is on allowing banks to improve growth while remaining reliable for their stakeholders and customers.