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Carrots and sticks in bank governance: time for a bigger stick?

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  • Richard Ridyard

Abstract

Purpose - This paper aims to investigate how bank governance can be altered to reduce risk taking and engender greater financial stability. Design/methodology/approach - The paper reviews existing bank governance arrangements, contemporary challenges and alternative reforms. Findings - It is argued that recent reforms are incomplete. Greater countervailing incentives for bank managers and shareholders are required. This prompts an inquiry into the merits and demerits of four types of reform: changes to executive compensation arrangements; the introduction of a liability standard for directors; the removal of limited liability for bank shareholders; and a criminal offence for managers. Originality/value - Discussion illumines several problems with the current approach to bank governance and provides insights that can help direct future reform.

Suggested Citation

  • Richard Ridyard, 2019. "Carrots and sticks in bank governance: time for a bigger stick?," Journal of Financial Regulation and Compliance, Emerald Group Publishing Limited, vol. 28(4), pages 527-539, June.
    • Handle: RePEc:eme:jfrcpp:jfrc-05-2018-0084
    DOI: 10.1108/JFRC-05-2018-0084
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