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Internal Corporate Governance and the Financial Crisis: Lessons for Banks,Regulators and Supervisors

Listed author(s):
  • Elisabetta Gualandri


  • Enzo Mangone


  • Aldo Stanziale


This 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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Paper provided by Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi" in its series Centro Studi di Banca e Finanza (CEFIN) (Center for Studies in Banking and Finance) with number 11111.

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Length: pages 27
Date of creation: Nov 2011
Handle: RePEc:mod:wcefin:11111
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  1. 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.
  2. Brogi Marina, 2010. "Bank corporate governance and sound and prudent management," Banca Impresa Società, Società editrice il Mulino, issue 2, pages 283-308.
  3. Elisabetta Gualandri, 2011. "Basel 3, Pillar 2: the role of banks’ internal governance and control function," Centro Studi di Banca e Finanza (CEFIN) (Center for Studies in Banking and Finance) 11091, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".
  4. Alicia Novoa & Steven A. Seelig, 2009. "Governance Practices At Financial Regulatory and Supervisory Agencies," IMF Working Papers 09/135, International Monetary Fund.
  5. Vittorio Conti, 2009. "Remuneration systems, incentives and corporate governance," BANCARIA, Bancaria Editrice, vol. 12, pages 12-20, December.
  6. 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.
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