Conduct Risk: Meaning, Interpretation and Dissension

Following serious and widespread episodes of misconduct in the financial services industry, regulators, international standard-setting bodies and financial institutions worldwide have been discussing opportune approaches to deal with conduct risk. Identifying, analysing and tackling this risk have become the keywords to make financial firms take proactive steps against a common problem. Significantly, the way misconduct risk is understood will determine the ways for dealing with it properly. Given the incentives and guidelines that regulators and policymakers have so far provided within the conduct risk debate, it is natural to review their own review of such a risk. In practice, this paper addresses the question of whether their interpretation constitutes a solid, clear and consistent basis for financial institution proper understanding and management