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Part II Governance Structures and Regulation, 7 Responsibility of Directors of Financial Institutions

Steven L Schwarcz, Aleaha Jones, Jiazhen Yan

From: Governance of Financial Institutions

Edited By: Danny Busch, Guido Ferrarini, Gerard van Solinge

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2023. All Rights Reserved.date: 25 February 2024

Regulation of banks — Investment business

This chapter details the governance responsibilities of directors of financial institutions in the United States and worldwide. The fiduciary duties of directors of firms, including financial institutions, are owed primarily to the firm to act in the firm’s best interests. Invariably, the fiduciary duties of directors to the firm include the duty to consider the interests of the firm’s shareholders. Both in the United States and in the European Union, directors' fiduciary duties are often discussed as a duty of care and a duty of loyalty. While its exact formulation varies in different jurisdictions, the duty of care addresses the standard by which directors conduct business operations and activities. On the other hand, the duty of loyalty addresses conflicts of interest between a director and the firm. The chapter then examines the mechanisms for enforcing fiduciary duties.

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