To Örebro University

This study explores how institutional demands influence banking, with a focus on the implementation of a regulatory initiative named KRITA, where the regulator (the Swedish Riksbank) requires more granular credit information from banks. This is a mirror of the ECB regulation called AnaCredit. The study departs from an institutional perspective (DiMaggio and Powell, 1983) and applies insights toaccounting information to understand how institutional demands of ‘hard’ [digitisable] credit information influence banking. To better understand how KRITA influences banking, a leading bankwith an autonomous branch office network, recognised for low credit losses and excellence in credit assessment, was selected as a case bank. The study builds on interviews with bank personnel,representatives of the Swedish Bankers’ Association, regulators and industry experts, together with retrieved documentation of the institutional demands that has been formed during negotiations between the banks and the regulator in order to enforce the implementation of the KRITA regulation.The study shows that banks responded to the regulatory initiative before it was adopted. The KRITA regulation demands reporting of credit information that needs to be digitisable. Specifically, the regulatory initiative directs more attention to digitisable hard information and no attention to nondigitisable soft information. As a result of the uncertainties, tensions arise between the regulator and the regulated.The study also demonstrates the importance of qualitative information and tacit knowledge for the regulated bank, and the regulatory framework omits important credit information. Moreover, the study demonstrates that the KRITA regulation is a game changer of reporting for the bank, and a central effect of the KRITA regulation is that it forces banks to make IT-investments in order to be able to comply with the regulation when it come into effect. The study contributes to literature on institutional demands (DiMaggio and Powell, 1983; Elliot and Cäker, 2017).The study is a unique case of the KRITA regulation and how KRITA influences banks. In addition to other studies on how institutional demands, i.e. bank regulations, influence organisations and accounting practices (Crawford, 2017; Überbacher and Scherer, 2020), this study shows that even a regulatory initiative such as KRITA influences the bank, even prior to the regulation being adopted and coming into effect.

The overarching purpose of the thesis is to explore how institutional demands influence banks, which has been a core issue in banking research. This has become even more critical since the financial crisis of 2007–2009. By conducting a qualitative study and paying attention to the exchange of different forms of hard and soft accounting information, the thesis expands the current knowledge on how institutional demands influence highly regulated organisations, such as banks, which can face sanctions if they are not compliant when potential regulations enter into force.

The thesis contributes to literature on institutional demands, as the thesis shows that even financial regulatory initiatives influence banks. Accordingly, the potential regulations can create tensions between banks and regulators. Here, the increased dependency on information technology (IT), which must be developed, is central. This is demonstrated by studying regulations and the formation of regulatory initiatives, including MiFID II, KRITA and financial robo-advising.

The thesis includes four individual studies and puts them in a larger context, and it relates them to each other to increase our knowledge. Study I, which contributes to knowledge on how exchanges between firms and banks take place. It demonstrates that the exchange is more complex than previous literature suggests, and that the exchange differs depending on what financial services are considered. Studies II–IV then add knowledge on how institutional demands, manifested by regulations and regulatory initiatives, influence banks. These studies also reflect on the importance of qualitative information when adopting new financial regulations and when regulating certain bank services, primarily those services that rely on softer forms of accounting information.

Specifically, Study IV demonstrates how financial robo-advising comes into being and influences financial intermediaries, including FinTech companies, such as modern banks, by focusing on the regulatory discourse and the regulators’ definition of financial robo-advising.

Furthermore, the thesis contributes to the literature on hard and soft accounting information, in the sense that there are a number of different definitions that, to some extent, can be paradoxical. The study demonstrates how the definition that is used in our attempt to capture accounting information also influences the result. This touches on the value that we attempt to measure and the core of what is considered as accounting information.

Finally, the thesis demonstrates that regulators tend to rely more on information, such as numbers and quantitative information, instead of more context dependent information, such as qualitative information. Thus, the demanded accounting information influences and materialises, to some extent, what banks become. This means that the demand from regulators influences these regulated firms, which, in turn, adapt to the demands and develop their infrastructure accordingly. Thus, the IT-infrastructure becomes a part of our physical reality – i.e. the ideas and demands of regulators become transformed by the regulated into the physical information systems, manifested by e.g. financial robo-advisors.  

Financial robo-advising and knowledge on how regulatory initiatives influence organisations are two areas that are not very well understood. We know that institutional demands, such as regulations, can influence organisations, as discussed by DiMaggio and Powell (1983), but there is a dearth of research on how. In particular, how regulatory initiatives related to a new emerging phenomenon, such as financial robo-advising, influence organisations. Even before specific regulations have been adopted, regulatory initiatives manifested in texts can influence organisations (see Cooren, 2004; Fairclough, 1992; Phillips et al., 2004; Vaara et al., 2010). The purpose of this paper is to study how institutional demands, manifested as regulatory initiatives, influence financial robo-advising. To do so, I conducted a qualitative study where I critically analysed potential effects, based on four regulatory texts on financial robo-advising. These texts include regulatory documents by the financial regulatory bodies in Sweden and in EU that have been produced on this topic. The study finds that a new technology such as financial robo-advising is strongly influenced by the regulatory discourse and how both financial advising and financial robo-advising are defined. I show how the new form of financial advising, including financial robo-advising, comes into being, by the interplay of text and talks between the regulator and involved stakeholders. The study also finds that financial robo-advisors can be viewed as intermediators of hard information, even though the advice may not be interpreted or viewed as such.

The purpose of this study is to explore the nature of firm–bank exchange. Using a qualitative research method and existing theory, by capturing transaction-based and relationship-based elements, I examine ten firms and eight different bank services important for the exchange between the firms and their banks. The study indicates that the exchange is more complex than previous theories have proclaimed, since the nature of the exchange differs when central elements of different bank services are compared. There are bank services, such as bank account and loans, which have a high degree of both transaction-based and relationship-based elements. Saving and investment are also indicated as consisting of both transaction-based and relationship-based elements. Other services, such as depositing of cash, digital depositing and payments clearly have a higher proportion of transaction-based elements than of relationship-based elements, but depositing of cash differs somewhat from digital depositing regarding some of the elements investigated. The study suggests that advising has a high level of relationship-based elements, while the transaction-based elements are much less evident. For the service exchange of money, both transaction-based and relationship-based elements are present at a level below medium. This demonstrates that firm–bank exchange has a multidimensional nature.

Syftet med denna explorativa studie är att undersöka beskaffenheten på utbytet av olika banktjänster mellan små och medelstora företag och banker. Med hjälp av befintlig teori och kvalitativ metod identifieras transaktionsbaserade och relationsbaserade element. Tio företag och åtta banktjänster studerades och resultaten indikerar att utbytet är mer komplext än tidigare studier antyder. Utbytet skiljer sig nämligen åt när de olika banktjänsternas transaktionsbaserade och relationsbaserade element jämförs. Banktjänster som bankkonto och lån karaktäriseras av en hög nivå av både transaktionsbaserade och relationsbaserade element. Även för sparande och investeringar förekommer såväl transaktionsbaserade som relationsbaserade element, men på en något lägre nivå. Tjänster som insättning av kontanter, elektroniska insättningar och betalningar har en klart högre nivå av transaktionsbaserade element än relationsbaserade element, men insättning av kontanter skiljer sig något från digitala insättningar för de element som undersökts. Tjänsten rådgivning karaktäriseras av en hög nivå av relationsbaserade element, medan de transaktionsbaserade elementen är mindre framträdande. Växling indikerar en nivå under medium för både transaktionsbaserade samt relationsbaserade element. Sammantaget påvisar detta att utbytet mellan små och medelstora företag och deras banker har en multidimensionell karaktär.