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When the music stops – holding bank executives accountable for misconduct

The Great Financial Crisis of 2008 exposed a wave of banking scandals that triggered financial instability and eroded public confidence in banks. In the aftermath of the crisis, there was a growing sense that regulators were not doing enough to hold bank executives accountable for their failures. This led to calls for reforms to the regulatory frameworks that govern the accountability of banking executives.

 

Some authorities have introduced individual accountability regimes that impose specific responsibilities on senior bank executives. Others have relied on broader regulatory frameworks to pursue corporate wrongdoing. Regardless of the approach taken, all frameworks are ultimately reliant on robust supervision and enforcement.

 

The paper argues that a multi-faceted approach is needed to hold bank executives accountable. This approach, which the authors call the “accountability stack,” includes layers of seemingly disparate regulatory and supervisory instruments that interact in such a manner where the whole may be more effective in fostering individual accountability than the sum of the parts. Above all, the stack needs to be supported by the institutional will to act.

Categories: Recommended Readings
Author: BIS