The risk-related tone from the top: evidence from German regional banks

Arnd Wiedemann, Christiane Bouten, Patrick Hertrampf, Volker Stein and Nicolas Mues

Journal of Risk Research, 2024, vol. 27, issue 7, 713-734

Abstract: The financial crisis of 2007 and 2008 was a wake-up call for the banking sector. Since then, many activities have been taken to improve the stability of the financial industry. Our paper aims to derive a risk-related tone from the top that enables top management to equalise their employees’ risk behaviour and align the desired risk behaviour with the bank’s risk appetite. Even though individual fragments of measures and requirements to implement a risk-related tone from the top have emerged over the years, a holistic picture is still waiting to be established. Especially the normative management is crucial for implementing a risk-related tone from the top as this channel supports top management in communicating the core values. To gain news insights into the tone from the top and the top managements’ communication behaviour, we use a sequential explanatory mixed method approach. Our aim is to unite the positions of research and supervision. Therefore, we start with a comprehensive literature review to identify the relevant research streams. Building on this theoretical fundament, we evaluate practitioners’ communication behaviour quantitatively via a questionnaire with a sample size of 197 German regional banks. Qualitatively, we analyse the communication behaviour via eight interviews with CEOs of German regional banks. For the supervisory perspective, we build on the FSB ‘Guidance on Supervisory Interaction with Financial Institutions on Risk Culture’. This guidance not only emphasises the importance of the tone from the top, but also provides a first holistic picture of supervisory efforts on the topic. In summary, we consolidate the results from research, supervision and practice to derive a holistic picture for the implementation of a risk-related tone from the top. Finally, our holistic integration reveals future directions for research, supervision and practice.

Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/13669877.2023.2176911 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:jriskr:v:27:y:2024:i:7:p:713-734

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RJRR20

DOI: 10.1080/13669877.2023.2176911

Access Statistics for this article

Journal of Risk Research is currently edited by Bryan MacGregor

More articles in Journal of Risk Research from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().