Internal Corporate Governance and the Financial Crisis: Lessons for Banks,Regulators and Supervisors
AbstractThis paper aims to highlight the importance of banks’ Internal Corporate Governance (ICG), viewed as an operational mitigation instrument, in a context where banks enjoy a high degree of organisational flexibility due to principle-based regulatory and risk-based supervisory approaches. The recent crisis has shown, on the one hand, that financial mitigations (i.e. capital requirements) are, per se, not sufficient to ensure the stability of the banks (which underpins the soundness of the entire financial system) and, on the other hand, the failure of the light-touch supervisory approach. The main research question is whether the improvement of ICG, involving proper protection for stakeholders and the switch to a more intrusive supervisory model, will be able to offset the failures of market discipline revealed by the crisis and, together with Basel 3’s reinforced capital adequacy regime, strengthen the resilience of the financial system, without the reintroduction of structural reforms. In the European Union, the new European Systemic Risk Board (ESRB) and, above all, the three new European Supervisory Authorities (ESAs) will play a crucial role in this process.
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Bibliographic InfoPaper provided by Universita di Modena e Reggio Emilia, Facoltà di Economia "Marco Biagi" in its series Centro Studi di Banca e Finanza (CEFIN) (Center for Studies in Banking and Finance) with number 11111.
Length: pages 27
Date of creation: Nov 2011
Date of revision:
Banks’ Internal Corporate Governance; Financial Crisis; Operational mitigation; Supervisory approaches; European Supervisory Authorities;
Find related papers by JEL classification:
- G01 - Financial Economics - - General - - - Financial Crises
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
- M4 - Business Administration and Business Economics; Marketing; Accounting - - Accounting
- M42 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Auditing
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- Hamid Mehran & Alan Morrison & Joel Shapiro, 2011. "Corporate governance and banks: what have we learned from the financial crisis?," Staff Reports 502, Federal Reserve Bank of New York.
- Brogi Marina, 2010. "Bank corporate governance and sound and prudent management," Banca Impresa Società, Società editrice il Mulino, issue 2, pages 283-308.
- Vittorio Conti, 2009. "Remuneration systems, incentives and corporate governance," BANCARIA, Bancaria Editrice, vol. 12, pages 12-20, December.
- Francesco Cannata & Massimo Libertucci & Francesco Piersante & Mario Quagliariello, 2010. "Regulatory impact assessment at the Bank of Italy," Questioni di Economia e Finanza (Occasional Papers) 78, Bank of Italy, Economic Research and International Relations Area.
- Alicia Novoa & Steven A. Seelig, 2009. "Governance Practices at Financial Regulatory and Supervisory Agencies," IMF Working Papers 09/135, International Monetary Fund.
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