Corporate governance and banks: The role of regulation in reducing the principal-agent problem

The purpose of this paper is to analyse some of the important issues concerning the corporate governance of banks and financial institutions and the related issues of financial regulation. The paper argues that corporate governance of banks is largely concerned with reducing the social costs of bank...

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Bibliographic Details
Published inJournal of banking regulation Vol. 7; no. 1-2; pp. 17 - 40
Main Author Alexander, Kern
Format Journal Article
LanguageEnglish
Published London Palgrave Macmillan 01.02.2006
Subjects
Bank management
Bank officers
Banking industry
Banks
Corporate governance
Cost control
Deposit insurance
Employees
Financial services
Incentives
Regulated industries
Regulation of financial institutions
Risk management
Shareholder relations
Society
Stakeholders
Studies
United Kingdom > UK
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Summary:The purpose of this paper is to analyse some of the important issues concerning the corporate governance of banks and financial institutions and the related issues of financial regulation. The paper argues that corporate governance of banks is largely concerned with reducing the social costs of bank risk-taking and that the regulator is uniquely positioned to balance the relevant stakeholder interests in devising governance standards for financial institutions that achieve economic development objectives, while minimising the externalities of systemic risk. The paper also analyses recent international initiatives in the area of corporate governance and banking, including some of the proposals of the Basel Committee on Banking Supervision. The paper then reviews the legal and regulatory framework of corporate governance in the United Kingdom for banks to illustrate some of the strengths and weaknesses of the UK approach, and to suggest possible regulatory techniques for other jurisdictions. [PUBLICATION ABSTRACT]
ISSN:1745-6452
1750-2071
DOI:10.1057/palgrave.jbr.2340003