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• Unfair banking practices, or the theoretical and practical importance of operational risk management nowadays.

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  Dávid Gulyás

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  Nowadays, the management of operational risks in banking  ̶  in particular conduct risks  ̶  is becoming an increasingly important part of risk management. The financial crisis of 2008 and partly related to it, the Hungarian foreign currency loan crisis, have highlighted on the importance of this. Both crises were triggered, besides other reasons, by unfair banking practices and by the failure to respect the principle of fair banking. In my research I am looking for answers to the question to what extent can be considered unfair banking practices if banks impose several financial products on their customers, such as insurance and overdraft facilities, which they do not need. I will also examine to what extent the customers are aware of the fact, that they get a linked product and what it means for them in terms of risk-taking. My research consists of several parts. Firstly, I define operational and conduct risks. After that focusing on Hungary, I will examine the sales and commercial banking practices that played a role in the development of the foreign currency loan crisis, with a particular focus on the conduct risks. I will define what can be considered unfair banking practices. At the end of my theoretical overview I take into consideration why the linked products sold by today's Hungarian financial institutions are problematic and how information asymmetry drives a wedge between the bank and the customer. I also conduct primary research in the course of my research. Using an online questionnaire, I investigate the choice between current account structures of the Hungarian adult population. The results are analysed by using statistical methods.