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 15: Ethical culture and central banking

Thomas C. Baxter Jr.

Abstract

The chapter examines whether central banks need to be mindful of their ethical culture. It concludes that they do need to be mindful of ethical culture and face significant adverse consequences if they reach a different conclusion. After establishing the factual predicate that central bank officials do occasionally engage in misconduct, it turns to the related topic of central banks and legitimacy, and offers the view that the objective of legitimacy and the related need for public trust makes it especially important for central banks to pay careful attention to misconduct risk. The chapter identifies some of the techniques that central banks use to mitigate misconduct risk, and the principal measures that may be employed to accomplish this objective.

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