Virtually all large banks and other financial institutions in the UK and internationally are public limited liability companies whose shares are listed on one or several stock exchanges. As such, their corporate governance and, in particular, the incentives faced by their directors and senior managers are to a significant extent determined by corporate and securities law rules such as directors’ duties, directors’ liability in insolvency, takeover regulation, disclosure obligations, shareholder rights and rules on executive remuneration. At the same time, systemically important financial institutions in the UK are licensed, regulated and supervised by the Prudential Regulation Authority (PRA).
This book explores the relationship between, on the one hand, the broader corporate law, corporate governance and securities law framework and, on the other, the prudential regulatory framework. Although the book’s main focus is on UK law, much of the policy argumentation is relevant globally and therefore appropriate international comparisons are drawn, and analysis of EU law and regulation is included. The book argues that the corporate law regime, which focuses on shareholder empowerment and profit maximisation, operates as an antithesis to prudential regulatory objectives thus undermining the safety and soundness of banks and other financial institutions by encouraging risky behaviour that may be in the best interests of their shareholders, but is clearly not in the public interest.
Introduction
1.Shareholder Power as a Major Cause of Excessive Risk-Taking In Banks and Other Financial Institutions
2. The UK Corporate Law and Governance Framework as a Mechanism To Facilitate Risk-Taking By Corporate Managers and Shareholders
3. The Development of the Prudential Regulatory Framework as a Response to the Problems Posed by Financial Firms Operating with Limited Liability
4. Post-Crisis Reforms and Their Limitations: Regulating Financial Institutions’ Capital and Corporate Structure
5. Post-Crisis Reforms and Their Limitations: Regulating the Qualities and Incentives of Financial Institution Directors and Senior Managers
6. The Need to Reform the Corporate Law Framework as it Applies to Financial Institutions: Towards Financial Sustainability
7. Reforming the Civil Liability Framework for Financial Institution Directors and Senior Managers to Foster Financial Sustainability
Conclusion
Biography
Andreas Kokkinis is Assistant Professor at the School of Law of the University of Warwick, UK.
"Dr Kokkinis' book reminds us of the importance to critically question the shareholder primacy model in corporate governance especially when certain public interests are at stake in how important corporations are governed. It is very much aligned with UK financial regulators' view that senior managers should be made more responsible for public interest objectives, charting a unique path away from religious adherence to shareholder primacy."- Dr. Iris H Chiu,
Professor of Corporate Law and Financial Regulation at UCL"For too long, corporate and banking law have remained mutually distinct subject areas. This was illustrated by the markedly differing academic and policy discourses in these fields following the financial crisis. In this ground-breaking and thought-provoking work, an author who is equally well-versed in both specialisms provides a lucid, compelling and conceptually sophisticated exposition of why prudential bank regulation is incapable of resolving financial stability concerns in the absence of supportive corporate law reforms. Kokkinis’ polemic is at once both radical and common-sense. Above all, it calls on academics and policymakers to recognise the potential of corporate law to act as a powerful public policy mechanism in the financial domain." -Dr. Marc Moore, Reader in Law at Cambridge University
