Applying the basel committee on banking supervision risk culture guidelines: a credit risk investigation.

Abstract

Significant investments to improve risk management practices could be wasted unless organisations establish and monitor sound risk cultures. Although the Basel Committee on Banking Supervision (BCBS) provides valuable risk culture guidelines, the benefits and challenges of implementing these guiding principles are unclear. This study focused on management’s understanding and perception of the BCBS risk culture principles within a credit risk-related area of a South African bank. This qualitative study was based on a review of relevant literature followed by semi-structured interviews with executives and senior and middle managers. The interview data were analysed using a risk culture codebook based on the Financial Stability Board (FSB)’s risk culture approach adopted by the BCBS, combined with the Central Bank of the Netherlands’ principles used for cultural supervision. Participants’ awareness of the BCBS risk culture guidelines was lower than expected. However, even though they may not have known the guidelines, their knowledge and insights relating to the concepts covered by the guidelines were high.