Corporate Governance Issues for Banks: A Financial Stability Perspective

Abstract

Corporate governance is not only a question of equity governance, but for banks specific debt governance issues are also involved. It is analysed how debt governance, and in particular the incentives and power of the parties in the banking firm to assume (excessive) risk are affected by different governance mechanisms and structures. Hence, approaching the question from a financial stability perspective, the conclusion is that compared to non-financial firms corporate governance models and the functioning of the board of directors should be designed differently for banks.