Corporate Law and Financial Instability by Kokkinis Andreas;

Author:Kokkinis, Andreas;
Language: eng
Format: epub
Publisher: Routledge

5 Post-crisis reforms and their limitations

Regulating the qualities and incentives of financial institution directors and senior managers

This chapter explores the regulatory rules affecting financial institutions’ internal governance that have been introduced in the aftermath of the 2007–2009 crisis. Some of these rules regulate areas that were never regulated before such as institutions’ board structure, risk management function and executive remuneration, while others strengthen long-standing areas of prudential regulation such as the requirement that senior managers are fit and proper, and the power of the authority to impose regulatory sanctions on senior managers. It will be shown that the combined effect of all these rules is the creation of a unique corporate governance framework for banks and other financial institutions, which shares some elements with the broader corporate law framework applicable to all public companies but is clearly distinct from it, as it contains many regulatory rules that are mandatory in nature and aim to safeguard systemic stability rather than maximise shareholder value.1 However, it will also be demonstrated that the resulting framework remains heavily influenced by the traditional corporate law emphasis on shareholder empowerment and shareholder value maximisation, and therefore that the incipient transformation of the corporate law framework for financial institutions remains unfinished.

To that effect, the chapter is structured as follows. Section I sets out the soft-law and regulatory rules regarding financial institutions’ board structure and the organisation of their risk management function. Section II explores the detailed regulatory framework in place on senior executive remuneration in banks with special emphasis on the CRD IV rules that limit the amount of variable remuneration paid as a percentage of fixed remuneration. Section III will trace the evolution of the ‘fit and proper’ requirement for bank senior managers and will focus on the recently introduced Senior Persons Regime applicable to banks, investment firms and insurance companies. Then, section IV will examine the regulatory rules that enable regulators to pursue individual enforcement against financial institutions’ senior managers and will explore the way the PRA has used these powers in recent enforcement cases arising out of the Co-operative Bank crisis in 2013. Section V concludes.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.