Corporate Governance in the Banking Sector Theory, Supervision, ESG and Real Banking Failures

This book gives an overview of the most important theories on Corporate Governance, investigating the myth and the reality of it. It argues that within the banking sector exist two new agency costs (i.e., bank depositors and shareholders vs. directors and bank depositors vs. shareholders and directors). These agency problems are difficult to reduce for two reasons. First, banks are complex and opaque. Second, government implicit guarantees and the deposit insurance systems reduce the monitoring of depositors.

This book also takes a deep dive into research on CG in the banking sector via a unique and innovative literature review covering the time period between 2000-2020. It finds that some specific CG characteristics affect banks: risk appetite, performance, accounting quality, compensation and corporate social responsibility disclosure.

Furthermore, this publication contends that institutional investors are changing CG for the better, describing how major financialmarkets factors such as rating agencies and sell-side financial analysts make CG visible. Additionally, it investigates how managerial biases and irrational investors can affect CG negatively, leading to company distress.

All-in-all, this book makes a threefold contribution: for regulators, it offers suggestions on how to improve banks’ supervision; for researchers, it suggests new research topics; and for practitioners, it connects CG theory with real cases of CG failure.

Chapter 1. The Meaning of Corporate Governance and Its Role in the Banking Sector.- Chapter 2. Corporate Governance Theories and the Banking Sector.- Chapter 3. Corporate Governance in the Banking Sector: A Literature Review.- Chapter 4. CG Stock Markets and the Environmental, Social and Corporate Governance (ESG) Indicators.- Chapter 5. Corporate Governance and Behavior Finance.- Chapter 6. Why Corporate Governance Matters - Spectacular Defaults.

Bruno Buchetti is contract Professor of Corporate Governance and Management at the University of Padua (Italy). He worked at the European Central Bank (Frankfurt am Main, Germany), as a Supervision Analyst in the “COI - Centralized On-Site Inspections” division of the Single Supervisory Mechanism (SSM). He also worked in Credit Suisse AG (Zurich, Switzerland) as an analyst/bank inspector. He received his PhD in Management & Innovation from the UCSC University (Milan, Italy). He holds a BSc in Economics & Business Administration and a MSc in Banking & Finance summa cum laude. During his MSc, thanks to a scholarship for academic merit, he participated in an exchange program at Stanford University (US - California). His research has been published in refereed international journals including “The Journal of Management and Governance” and the “Journal of Accounting and Public Policy”. He is the author of “Corporate Governance and Firm Value in Italy: How Directors and BoardMembers Matter” published in 2021 (Springer Nature). His main research interests are focused on corporate governance, financial accounting and banking.

Alessandro Santoni is working for the International Monetary Fund (IMF) and was previously the European Central Bank (ECB) manager responsible for Onsite Inspection and previously for Banks Crisis Management Interventions. He was involved in several banking crises, insolvency proceedings, and resolution measures. He also contributed to developing the post-crisis financial safety net in the EU and Emerging markets. Previously he worked in the Banking industry for more than 15 years in Commercial Banks as BMPS and Investments Banks as Goldman Sachs. He has a Ph.D. from the University of Siena, Master in International Economics from SDA Bocconi, and an EMBA from Columbia University, London Business School and Hong Kong University. He has three degrees in Economics, History, and Political Science from the University of Siena. He is Certified Financial Crime Specialist (CFCS) and AML Specialist (CAMS). He teaches Risk Management, Financial Crimes at the Cass University of London and the Frankfurt School of Management. He is the author of several academic papers and books.