Behavioral finance views on bank regulation to strengthen bank stability

More than 10 years after the financial crisis of 2007 and 2008, regulation, research, and practice can look back on the far-reaching changes in the regulatory requirements as well as the lessons learned. Nevertheless, despite recent regulatory initiatives, banking crises continue to emerge, often as a result of management decisions that perpetuate systemic risks. The focus of this dissertation is on the individual behavior of decision makers. The financial crisis proved that crises can be caused by many factors, especially misguided decisions. Because of the heavy interconnectedness of the banking sector, systemic risks have reached unprecedented levels. This process was last observed in 2007 and 2008 with irrationally high investments in mortgage-backed securities. This dissertation added value to regulation, research, and practice by generating new steering impulses to sharpen decision makers’ awareness of risk.