Report: Directors should be accountable for bank failure

21 September 2012

Directors should be held directly responsible for the failure of banks, a new report has argued.

Research published today (21 September) by the Adam Smith Institute (ASI) indicated that top executives need to be held to account for errors committed by their companies as the culture of bailouts has merely encouraged overly-risky behaviour.

With this in mind, the think tank has called for an era of more "blunt" regulation in order to prevent any repeat of the recent banking crisis and supports measures such as making senior employees liable for losses through their shareholdings and bonuses.

Such rules would be specifically targeted at directors who have the necessary authority to take decisions that have a material effect on their company's risk profile.

This, the ASI believes, would result in bosses being more proactive in their attempts to oversee the risk-taking activities of staff members.

Mikko Arevuo, author of the report, said this system would be a marked improvement on the current "institution level capital adequacy-based frameworks".

By Claire Archer

Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development