From compliance to coping: Experiences of Chief Risk Officers in UK banks 2007-2009

Even without the pressures of a financial crisis, the Chief Risk Officer (CRO) in UK banks occupied a potentially conflicted role during 2007 - 9. The Boards of banks had created the CRO role with responsibility for managing commercial risk but also for producing public risk reports within a system of enforced self-regulation. Under this system, the regulator seeks to overcome control asymmetries by harnessing the governance resources of regulated organizations. Theoretical perspectives of regulation in action, informal groups in organizations, and individual risk perception, indicated that CROs’ dilemmas merited further study. Banks’ selective risk reporting practices were under-represented, with scholarly knowledge seemingly limited by difficulties of access and trust. This research overcomes these limitations, gaining access to a closed group to conduct qualitative depth interviews with bank senior managers including 35 CROs (one-third of known incumbents in 2007). Ideas of enforced self-regulation were found not to account fully for banks’ risk reporting practices. The regulator was little-respected, mistrusted, and had limited influence over bankers’ behaviour. Within a bank the CRO, though formally identified with risk governance, was informally pressed by powerful sales-side groups to report optimistically. Seeking senior management support to resist this pressure, many CROs instead found their Board prioritising sales activity over risk governance. Though employed as compliance managers, many CROs reinterpreted their role as a commercial support function, becoming coping agents for banks’ creative risk reporting. Enforced self-regulation does not restrain organizations whose reward systems reinforce asymmetries of control, whose economic power exceeds that of governments attempting to regulate them, and whose sales culture aggressively dictates organizational norms.<br/>New approaches are suggested to recognise and prevent conduct which increases financial market fragility. This thesis provides wider lessons for the relationships between organizational behaviour, individual cognition and regulatory power beyond the world of banking.

Name dc:type.qualificationname

Doctor of Philosophy

Level dc:type.qualificationlevel

Doctoral Thesis

Grantor dc:publisher.institution

King's College London

Year dc:date.issued

2013

Author dc:creator

• Miles, Roger

Advisors dc:contributor.advisor

• Rothstein, Henry Frederick
• Rogers, Marian Brooke
• Fairman, Robyn

Language dc:language

eng

Identifier

oai:kclpure.kcl.ac.uk:studenttheses/e2634d8e-1682-4790-8110-405b0ed2b359

OAI identifier oai:identifier

oai:kclpure.kcl.ac.uk:studenttheses/e2634d8e-1682-4790-8110-405b0ed2b359