Better banking for Britain

• Main Author: Rogge, Ebbe
• Published: SOAS, University of London 2016
• Subjects: 332.10941
• Online Access: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.707205

The global financial crisis had devastating effects on the financial system, economic growth and national debt of Western countries. The focus of this thesis is an examination of certain identifiable weaknesses in the corporate governance at UK banks which, it is posited, constituted an underlying cause of the crisis. It then considers the main regulatory responses to these identified weaknesses and assesses to what extent these have led to improvements in corporate governance at banks. This research is based on an examination of all the major failures at UK banks during and after the crisis, and of its related responses. In addition to UK responses, several solutions to the weaknesses identified at UK banks are also currently addressed through EU legislation and by the international Basel Committee. These are also reviewed. The principal conclusions are that: board effectiveness was low due to a lack of knowledge and of challenging of senior management; there was a culture placing growth and profit over risk management; and remuneration was inappropriately structured leading to unacceptable risk taking and scandals. It is further concluded that the mechanisms to limit the impact of a failure of a bank on its stakeholders, such as depositors and the taxpayer, were inadequate. A comparative case study of the financial crisis in Japan during the 1990s is also undertaken to consider whether, and to what extent, the Japanese regulatory response offers lessons to UK regulators and legislators. The principal finding is that comparative analysis of regulation and corporate governance at banks is problematic. Although there were similarities between the two financial crises and their impacts, the organisation and culture of the UK and Japanese banks is so different that different regulatory responses follow. Despite similarities in financial crises, different regulatory responses are more likely due to distinctive national contexts.