Banking on Governance? Conflicts of Interest Facing Bank Owners and Supervisors
Banks fail with alarming frequency, resulting in large losses of taxpayer money. A key factor in the high failure rate is the flawed governance mechanism, which exacerbates the risks inherent in banking. Bankers control a lot of other people's...
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| Format: | Viewpoint |
| Language: | English |
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World Bank, Washington, DC
2012
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| Online Access: | http://documents.worldbank.org/curated/en/1999/10/439337/banking-governance-conflicts-interest-facing-bank-owners-supervisors http://hdl.handle.net/10986/11454 |
| Summary: | Banks fail with alarming frequency,
resulting in large losses of taxpayer money. A key factor in
the high failure rate is the flawed governance mechanism,
which exacerbates the risks inherent in banking. Bankers
control a lot of other people's money and have much
discretion over the information they disclose. The
temptation to engage in excessive risk taking is strong.
Tightening banking supervision is seldom the solution. For
their part, banking supervisors often face incentives at
odds with those of taxpayers. At times they may prefer not
to act to minimize taxpayer losses. These twin governance
problems are further compounded by the common practice of
disclosing banking information only to supervisors, not to
markets. This Note explains the conflicts and proposes some solutions. |
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