Addressing Excessive Risk Taking in the Financial Sector: A Corporate Governance Approach

Authors

Steven L. Schwarcz
Maziar Peihani, Allard School of Law at the University of British ColumbiaFollow

Author Notes

Current Faculty [Maziar Peihani]

Files

Description

Excessive corporate risk taking by systemically important financial institutions (SIFIs) is widely seen as one of the primary causes of the global financial crisis. In response, an array of international reforms, under the auspices of the Group of Twenty’s (G20’s) standard-setting bodies, has been adopted to try to curb that risk taking. However, these reforms only impose substantive requirements, such as capital adequacy, and cannot by themselves prevent future systemic collapses.

To complete the G20 financial reform agenda, SIFI managers should have a duty to society (a public governance duty) not to engage their firms in excessive risk taking that leads to systemic externalities. Regulating governance in this way can help supplement the ongoing regulatory reforms and reduce the likelihood of systemic harm to the public.

[From Addressing Excessive Risk Taking in the Financial Sector: A Corporate Governance Approach - Centre for International Governance Innovation]

Publication Date

2018

Publisher

Centre for International Governance Innovation

City

Waterloo

Notes

Policy Brief No. 139