Banks’ Corporate Governance: lessons learnt from the Great Financial Crisis

Abstract

After acknowledging that one of the key factors that contributed to the Great Financial Crisis were the failures by banks in their Corporate Governance, standard-setting bodies have reinforced banks governance standards in order to reduce the shortcomings observed during the crisis. In March 2020, the Bank for International Settlement issued the paper “Bank Boards – a review of post-crisis Regulatory approaches” that, taking stock of specific aspects of the post-crisis Regulatory approaches used in 19 jurisdictions to strengthen Board oversight at banks, reviews the “Fitness and Propriety” assessment that these jurisdictions use to ensure that bank Board members are suitably qualified. Investigating the empirical evidence provided by scientific literature on the relationship among Corporate Governance and the profitability of the banks during the Great Financial Crisis, the results of this paper support some of the choices made by the Regulators to enhance the banks’ Corporate Governance in order to mitigate similar risks that banks could face subsequently.