Risk governance and regulatory adjustments in the public commercial banks of OECD

Purpose - This study aims to explore the relationship between risk governance characteristics (chief risk officer [CRO], chief financial officer [CFO] and senior directors [SENIOR]) and regulatory adjustments (RAs) in Organization for Economic Cooperation and Development public commercial banks. Design/methodology/approach - Using principal component analysis (PCA) and regression models, the research analyzes a representative data set of these banks. Findings - A significant negative correlation between risk governance characteristics and RAs is found. Sensitivity analysis on the regulatory Tier 1 capital ratio and the total capital ratio indicates mixed outcomes, suggesting a complex relationship that warrants further exploration. Research limitations/implications - The study’s limited sample size calls for further research to confirm findings and explore risk governance’s impact on banks’ capital structures. Practical implications - Enhanced risk governance could reduce RAs, influencing banking policy. Social implications - The study advocates for improved banking regulatory practices, potentially increasing sector stability and public trust. Originality/value - This study contributes to understanding risk governance’s role in regulatory compliance, offering insights for policymaking in banking.