The Role of Banking Governance in Consumer Trust and Confidence: A Shared Responsibility

Since the 2007 financial crisis there has been an increased awareness of risk governance in the banking sector among the wider public. The importance of banking to the economy is such that society in general has an interest in appropriate supervision. Financial institutions have a fiduciary responsibility toward the customers they serve, many of whom are not in a position to make fully informed and rational decisions and rely on the agency of experts in delegating decision making. Consumer trust and confidence in the industry are in part dependent on the assurance provided by risk governance. Deregulation of the banking sector, however, led to banks being given greater ability to determine their own level of risk, which was encapsulated in the Basel Accords. Yet, the financial crisis illustrated that banks had not acknowledged the level of risk to which they were exposed, thus calling into question the risk governance arrangements in place.