The Corporate Governance of Banks

Abstract:     
The study argues that commercial banks pose unique corporate governance problems for managers and regulators, as well as for claimants on the banks' cash flows, such as investors and depositors. The authors support the general principle that fiduciary duties should be owed exclusively to shareholders. However, in the special case of banks, they contend that the scope of the fiduciary duties and obligations of officers and directors should be broadened to include creditors. In particular, the authors call on bank directors to take solvency risk explicitly and systematically into account when making decisions or else face personal liability for failure to do so.

Number of Pages in PDF File: 17

Keywords: corporate governance, commercial banks, fiduciary duties

JEL Classification: G2, G3, L2, L5

Accepted Paper Series