A Theory of How and Why Central-Bank Culture Supports Predatory Risk-Taking at Megabanks
38 Pages Posted: 21 Jan 2016
There are 2 versions of this paper
A Theory of How and Why Central-Bank Culture Supports Predatory Risk-Taking at Megabanks
A Theory of How and Why Central-Bank Culture Supports Predatory Risk-Taking at Megabanks
Date Written: December 14, 2015
Abstract
This paper applies Schein’s model of organizational culture to financial firms and their prudential regulators. It identifies a series of hard-to-change cultural norms and assumptions that support go-for-broke risk-taking by megabanks that meets the every-day definition of theft. The problem is not to find new ways to constrain this behavior, but to change the norms that support it by establishing that managers of megabanks owe duties of loyalty, competence, and care directly to taxpayers.
Keywords: regulatory culture, financial crises, too big to fail, theft by safety net, political economy
JEL Classification: G20, G21, K23, P16
Suggested Citation: Suggested Citation