A new era for reputation risk in banking

There is only one issue in corporate business at present that really matters: why so many financial institutions have failed: why have they failed, how could we have prevented their failure, and what are regulators, supervisors and banking directors doing about it?  Key to analysis of the causes of failure is an understanding of the central role of reputation in the process of failure of so many major financial institutions.  Almost all key supervisors’ and commentators’ reviews of recent banking failures have laid the blame at the foot of banks and their failure to manage ‘reputational risk’.  As a result of the failures, banks face an uphill battle to restore their battered reputations.

In this paper, I review how reputation contributed to the string of banking failures (and who says so) and examine the responses proposed by global regulators.  The proposals and their shortcomings have major implications for reputation management initiatives and the state of the reputation management art.  Given the centrality of banking failures to global economic performance and broader management agendas, what happens in banking will have a major impact on all other sectors and areas of corporate practice and will chart the course for development of the art for the next five years.  Improving our understanding of what is happening to reputation management in banking is critical to controlling the reputation management agenda.

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