Research Handbook on Law and Ethics in Banking and Finance
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Research Handbook on Law and Ethics in Banking and Finance

Edited by Costanza A. Russo, Rosa M. Lastra and William Blair

The global financial crisis evidenced the corrosive effects of unethical behaviour upon the banking industry. The recurrence of misbehaviour in the financial sector, including fraud and manipulations of market indices, suggests the need to establish a banking culture that conforms to the highest standards of ethical and professional behaviour. This Research Handbook on Law and Ethics in Banking and Finance focuses on the role that law should play and the effectiveness of newly introduced regulations and supervisory actions as a driver for ethical conduct so as to reconnect the interests of bankers and financiers with the interests of society.
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Chapter 13: What makes deterrence credible?

Andromachi Georgosouli

Abstract

According to current orthodoxy, deterrence is credible when it is visible and visibility calls for enforcement action that is harsh enough to be taken seriously by the industry. In this chapter, it is argued that the focus on enforcement is misplaced because, when it comes to the question of credibility, at best it tells half the story. The credibility of deterrence is contingent to a multitude of factors. This chapter considers three of them all of which are closely inter-related: The regulator’s capacity to attain a congruence of minds and a congruence of hearts with the regulatees, and the regulator’s ability to harness its profile as a credible enforcer.

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