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Distinguishing Features of Banks for the Relational Approach

In: The Key Code and Advanced Handbook for the Governance and Supervision of Banks in Australia

Author

Listed:
  • Francesco de Zwart

    (University of Adelaide)

Abstract

Chapter 7 of the Stage 2 Key Code and Advanced Handbook examines the distinguishing feature of banks in the relational approach. We open by examining the similarities and differences with the Enron collapse examined in detail in Stage 1. Then the distinguishing features of banks are examined in detail – the maturity of debt, liquidity, leverage and the interconnectedness of banks. There follows a review of deposit insurance, government bailout and risk-taking including Hopt’s risk-taking and free-riding and the recognition that depositors are stakeholders in banks. Systemic risk is then examined including the EC’s ‘domino effect’ and differing risk preferences for shareholders and depositors. Conflicts of Interest are identified and the perceived weaknesses in governance codes. The chapter concludes with the recognition that specific governance variables for the distinguishing features of banks and specialised bank regulation are needed to introduce the [BankPrudReg] (+) variable for banks – the regulatory, prudential and supervisory regime. Also proposed are bank-specific governance variables for deposit insurance, bailout and the effects of risk-taking, maturity transformation, liquidity and risk management.

Suggested Citation

  • Francesco de Zwart, 2022. "Distinguishing Features of Banks for the Relational Approach," Springer Books, in: The Key Code and Advanced Handbook for the Governance and Supervision of Banks in Australia, edition 1, chapter 0, pages 83-93, Springer.
    • Handle: RePEc:spr:sprchp:978-981-16-1710-2_7
    DOI: 10.1007/978-981-16-1710-2_7
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