Well governed, sustainable and socially responsible financial corporations: Remote or real expectations?
Effective modern financial systems need to address complex issues concerning the role, purpose, regulation and culture of financial corporations. Yet there is minimal consensus on the right policy settings for the governance, sustainability and social license of these entities. This paper considers the nature and drivers of the key reforms since the global financial crisis, with a particular focus on changes in capital rules, bank lending practices, and contagion risks. It suggests that international capital reforms are unlikely to achieve their ambitious policy aims and characterises these reforms as last resort measures that will be tested only when extreme adverse events occur. It argues there is undue reliance on these measures, with insufficient regard for other governance, sustainability and social elements. The paper highlights increasing global risks around lending standards and levels of sector concentration and interconnectedness. It concludes that the global policy settings and the governance and conduct of the finance sector have not changed substantively over the last decade. The paper ultimately calls for bolder and more progressive scholarly and policy debate on what we expect from modern financial corporations in terms of governance, sustainability and social responsibilities.