Benchmarking in Banking

Below are some of the highlights of the Conduct costs project launched by the Centre for Banking Research. You can find the full report here https://www.city.ac.uk/news/2020/september/centre-for-banking-research-launches-conduct-costs-project

The CBR Conduct Costs Project aims to foster transparency in financial activity and to deliver a category of benchmarking, which comprises the level of conduct costs and the conduct risk of the banks, as an analytical tool for the banks and their stakeholders.

In aggregate, between January 2008 and December 2018, the 20 international banks, have paid conduct costs in excess of GBP 377 billion.

Over the past ten years, the cumulative total of conduct costs amounts to GBP 205.25 billion for the US banks in our sample; GBP 86.09 billion for the UK banks; GBP 41.31 billion for the Euro Area banks; GBP 40.19 billion for the Swiss banks, and GBP 4.62 for the Australian bank. Overall, the cumulative conduct costs reveal global vulnerabilities across different markets and jurisdictions.

Drivers of progress

The numbers recorded against a bank’s conduct costs might assist in explaining low profitability and share price performance. Moreover, the level of comprehensiveness of the dataset, besides adding context to the conduct costs, provides a valuable insight into a bank’s non-financial conduct performance.

Banks conduct costs to tell the story not only of specific financial institutions, their systems, and controls, governance and culture, but also the story of the individuals within the institution, their ethics, values and competence gaps. There is a connection between the institutions’ ethics and culture, and the frequency and severity of the misconduct. Likewise, conduct costs are an objective indicator of the negative effect of an inappropriate culture.

The full report can be downloaded here