The world’s biggest banks are missing out on a big opportunity. These institutions could boost their earnings by as much as $500 million a year by reducing their misconduct penalties by just 10 percent.1
That’s no easy feat. Many banks have already made significant investments in their compliance function to ensure that all employees observe applicable laws and regulations, yet their reputations and balance sheets continue to suffer.
Consider traditional compliance approaches, which emphasize rules and systems. Rigorous training, combined with better policing in departments like trading and markets, is expected to root out the few “bad apples” responsible for any wrongdoing.
But our research suggests that these tactics aren’t always enough. Successfully addressing the conduct challenge requires a radically different approach—one that goes beyond compliance. Banking leaders must recognize that good conduct depends on ethics and organizational culture as much as it does rules and systems.
Going forward, these leaders will need to use both hard and soft skills to make better decisions and achieve ethical outcomes across strategy, structure and systems. First, however, they need to understand what’s gone wrong.