Economic Policy Review

The Corporate Governance of Banks

April 2003Volume 9, Number 1
JEL classification: G2, G3, L2, L5

Authors: Jonathan R. Macey and MaureenO’Hara

The study argues that commercial banks pose unique corporate governance problems for managers and regulators, as well as for claimants on the banks' cash flows, such as investors and depositors. The authors support the general principle that fiduciary duties should be owed exclusively to shareholders. However, in the special case of banks, they contend that the scope of the fiduciary duties and obligations of officers and directors should be broadened to include creditors. In particular, the authors call on bank directors to take solvency risk explicitly and systematically into account when making decisions or else face personal liability for failure to do so.

PDF full articlePDF17 pages / 175 kb
Press release