But earning fee-based income through exorbitant charge, which are not revealed upfront, points to, in some ways, what may be described as ‘undue enrichment’. Dilution of reputation risk Generally, it is assumed that a penalty imposed by regulators would be a source of major reputation risk for the bank concerned, due to adverse public perception of such penalty and would thus be a deterrent.
Consequently, the effort is on to leverage these regulatory initiatives to rebuild trust and confidence in the global financial system. It is now globally accepted that in order to earn the trust of the consumers/ market participants, it is important that the regulatory system is seen and perceived to be fair and transparent. Twin peaks approach to financial sector regulation and supervision 10.