by Paul L. Lee

Observers have often asked whether corporate governance for banking institutions, i.e., banks and bank holding companies, is (or should be) different from governance for other corporations.  The resounding answer from the bank regulatory authorities is that the governance of banking institutions is (and should be) different from the governance of other corporations because of the special credit and liquidity functions performed by banking institutions.[1]  These special intermediary functions have historically led to a highly regulated environment for banking institutions, which has directly affected governance processes.  The bank regulatory authorities maintain that the directors of banking institutions are responsible to a broader set of stakeholders than just shareholders.  The additional stakeholders include depositors (and indirectly the federal deposit insurance fund), creditors and the regulators themselves. Continue reading →