The Risk Culture Scale: A Measurement Tool to Comprehensively Assess Banks’ Risk Culture

Abstract

In the wake of recent financial crises and scandals, risk culture has increasingly become the focus of various actors, such as supervisors, financial service providers, academics, and consultants. While it is acknowledged that a proper risk culture is needed to make banks safer, as an intangible, organizational, and social phenomenon, risk culture is difficult to define, and relevant literature is scarce. To fill this gap, we develop and validate a scale to assess all dimensions of risk culture according to the Financial Stability Board framework, thereby providing banks and regulators with an assessment of risk culture tools based on regulatory guidelines.