1 This literature is summarized and analysed in J Armour et al, Principles of Financial Regulation, Oxford University Press, 2016, Ch 17. The leading studies are A Beltratti and R Stulz, ‘The Credit Crisis around the Globe: Why Did Some Banks Perform Better?’, Journal of Financial Economics (2012), 105, 1; D Erkins, M Hung, and P Matos, ‘Corporate Governance in the 2007-2008 Financial Crisis’, Journal of Corporate Finance (2012), 18, 389; M Becht, P Bolton, and A Röell, ‘Why Bank Governance is Different’, Oxford Review of Economic Policy (2012), 27, 437.
2 Although the opposite is often stated, there is nothing in this theory which assumes that the shareholders’ interests are to be assessed on a short-term basis.
3 Brian Cheffins, ‘Did Corporate Governance “Fail” During the 2008 Stock Market Meltdown? The Case of the S&P 500’, The Business Lawyer (2009), 65, 1. He argues further that a major problem within banks was the failure to follow one general corporate governance good practice, that is, the continued existence in banks of an ‘imperial’ CEO. Brian Cheffins, ‘The Corporate Governance Movement, Banks and the Financial Crisis’ Theoretical Enquiries in Law (2015), 16, 1.
5 The financial crisis of 2007 to 2009 is estimated to have cost 15 trillion US dollars in lost production (about one-fifth of the world’s annual output) and to have led to a substantial increase in unemployment. State efforts to mitigate the crisis led in the euro-zone to a sovereign debt crisis which worsened the economic impact of the crisis in the countries affected.
6 At one end of the spectrum, the US Treasury made a substantial nominal profit on its bailout and subsequent sale of AIG (an insurance company, not a bank), whilst at the other the UK government still holds its 70 per cent stake in Royal Bank of Scotland (RBS), whose share price is still below the acquisition price.
7 Sometimes to the extent of rendering the state unable to finance its overall operations without itself being bailed out.
8 L Bebchuk and J Fried, Pay without Performance, Harvard University Press, 2004.
9 L Bebchuk, A Cohen, and H Spamann, ‘The Wages of Failure’, Yale Journal of Regulation (2010), 27, 257; S Bhagat and P Bolton, ‘The Financial Crisis and Bank Executive Compensation’, Journal of Corporate Finance (2014), 25, 313. What these studies do show, however, is that bank executives were no better at predicting the crisis than anyone else; otherwise, they would have sold out entirely.
10 e.g. L Enriques and D Zetzsche, ‘Quack Corporate Governance, Round III? Bank Board Regulation Under the New European Capital Requirement Directive’, ECGI Law Working Paper No 249/2014 (suggesting in particular that new bank board diversity requirements are ill-adapted to increase the board’s expertise in monitoring the development of the bank’s assets); Christoph Van Der Elst, ‘Corporate Governance and Banks: How justified is the match?’ ECGI Law Working Paper No 284/2015 (suggesting that post-crisis reforms have not accurately identified the peculiarities of bank governance).
11 See Becht et al, n 1, 438 (‘To make bank governance more effective it might be necessary to experiment with deeper reforms, such as allowing for creditor representation on boards.’); Van Der Elst, n 10, 32 (‘Probably there is no other industry where stakeholder governance is so pivotal. Debt holders and public interest have no voice in the bank governance system and should be represented by the legislator and the regulator.’)
12 Directive 2013/36/EU (OJ L176/338), Article 76 (hereafter CRD IV).
13 The classic example is the Delaware decision, In re Citigroup Ltd (2009) 264 A 2d 106. (Del Ch), where a shareholder action against directors for failing to monitor the bank’s risks arising out of loans to the sub-prime market was unsuccessful because the standard for liability was bad faith. Even in jurisdictions where liability is based on some form of negligence, judgments in favour of plaintiffs are difficult to achieve because of the prevalence of the business judgement rule (or an equivalent).
14 See the letter from Lord Turner, then chair of the Financial Services Authority (UK), published in the Financial Times (8 December 2010), defending the FCA’s decision not to take enforcement action against individuals in relation to the Royal Bank of Scotland’s ill-fated takeover of ABN-Amro, on the grounds that the acquisition was ‘highly risky but breached no regulation’. However, he also made the case for regulatory reform to induce bank boards to make a different and more cautious risk/return trade-off than would be acceptable in non-financial companies, precisely because of the size of the social losses associated with bank failure. A fuller version of the letter is available at: http://www.fsa.gov.uk/pages/Library/Other_publications/Miscellaneous/2010/1208_at.shtml, accessed 16 December, 2017. However, the CEO of the RBS at the time of its collapse, Sir Fred Goodwin, did agree to give up part of his pension and his knighthood was removed by the Queen. So, he suffered some financial loss and his reputational loss was high, but came at the end of his career.
15 FSA (UK), ‘The approved persons regime—significant influence function review’, Consultation Paper 08/25, December 2008, para 2.2.
17 After the crisis, the FSA was split in two, with its functions divided between a Prudential Regulatory Authority (PRA) and a Financial Conduct Authority (FCA). Since the interest of this chapter is with the stability of the banking system, the PRA’s rules are its primary concern.
18 House of Lords and House of Commons, Parliamentary Commission on Banking Standards, ‘Changing banking for good’, First Report of Session 2013–14, June 2013, vol II, para 564 (HL Paper 27-II; HC 175-II).
19 Financial Services Act 2000, section 59ZA (emphasis added)—a clear recognition of negative externalities. There is also a separate regime, not discussed in this chapter, for annual bank certification as fit and proper of those carrying out ‘significant harm functions’, that is, where the function carries the risk of significant harm to the bank or its customers, but not to interests outside the bank and those who deal with it (section 63E and F).
20 Section 60(2A). It is up to the bank how it allocates responsibilities.
21 Subsequent significant changes to the responsibilities must be notified to the regulator with such information as the regulator requires (section 62A). It appears that such changes do not automatically trigger a new approval process but the regulator could take the initiative to impose conditions on the existing authorization under section 63ZB.
23 Section 36 of the 2013 Act creates a new criminal offence, carrying imprisonment for up to seven years, for a senior manager whose conduct or omissions cause the bank to fail, the standard of liability being somewhere between gross negligence and recklessness. This is discussed further in Section V.
24 For some indication of how the regulator will approach this task, see PRA, Supervisory Statement SS28/15, ‘Strengthening individual accountability in banking’, May 2017. This policy document specifically excludes escape from individual responsibility because the impugned decision was a collective one. ‘The Duty of Responsibility recognises that individual Senior Managers should be held accountable for their individual contributions to collective decisions and their implementation insofar as those contributions are in scope of their Senior Manager responsibilities.’ (para 2.67)
25 See section 66B(6), repealed by the Bank of England and Financial Services Act 2016, section 25(3)(f) and (g), before it entered into force. The reasons put forward for the change were disputed in the legislative debates on the 2016 Act.
26 See Pottage v FSA, Upper Tribunal, 2012 (FS/2010/33) for a pre-reform decision where the regulator failed in its attempt to impose a penalty on an individual on the grounds that that person had done enough to address the problems in the bank of which he was or should have been aware.
27 PRA and FCA, ‘Approach to non-executive directors in banking’, PRA CP15/5 and FCA CP7/15, February 2015. Within its sphere the FCA also treats the chair of the nomination committee as a senior manager.
28 However, they are subject to a less intensive regime of regulatory approval, in order to comply with the CRD requirements. See SS 28/15, n 24, para 4.11.
31 Regulation (EU) No 468/2014 of the European Central Bank (ECB 2014/17), Articles 93 and 94 (SSM Framework Regulation).
32 Council Regulation (EU) No 1024/2013, Article 16(2)(m) ( OJ L287/63).
33 The ECB’s procedures are set out in ECB, ‘Guide to fit and proper assessments’, May 2017. The procedures are not remarkably different from those of the PRA in the United Kingdom.
34 September 2017, in force from 30 June 2018.
35 EBA/ESMA ‘Guidelines on the assessment of the suitability of members of the management body and key function holders’, 2017, 88. The Board of Appeal (BoA) of the European Supervisory Authorities had come to the same conclusion on the basis of the similar wording of the predecessor Directive to CRD IV (Article 22 of Directive 2006/48/EC). See SV Capital OŰ v European Banking Authority, Decisions EBA 2013 002 and BoA 2014-C1-02.
36 EBA/ESMA, Guidelines, n 35, 20.
37 They can normally sell their debt, but the price will reflect the market’s concerns about the bank’s current state.
38 If this is not the case, the bondholders may be more in favour of risk than shareholders, since the creditors will be the first to benefit from the upside of the decision.
39 FSB, ‘Principles on Loss-absorbing and Recapitalisation Capacity of G-SIBs in Resolution: Total Loss-absorbing Capacity (TLAC) Term Sheet’, November 2015, Term Sheet 4. In addition the TLAC must amount to a leverage ratio of 6 per cent, as calculated on the Basel basis. Minimum capital requirements count towards the TLAC requirement, except for capital required to meet regulatory buffers (e.g. capital conservation or counter-cyclical capital buffers). For the implementation of these recommendations in the European Union, see Commission proposal to amend the CRR (COM(2016) 850 final) and EBA, ‘Final Report on MREL: Report on the Implementation and Design of the MREL Framework’, December 2016 (EBA-Op-2016-21). In EU terminology TLAC has become MREL: ‘minimum requirements for own funds and eligible liabilities’.
41 The recent example of the use of the ‘not in the public interest’ exception to bail-in in the case of the Italian regional banks, however questionable, is not, it is suggested, a strong pointer in the direction of a general relaxation of the BRRD system, since these banks were not systemically important. See ‘Assessing the Merits of the Recent Italian Bank Bailouts’, International Banker (2017), <https://internationalbanker.com/banking/assessing-merits-recent-italian-bank-bailouts/>.
42 Tröger has argued that, given the uncertainties surrounding the bail-in process, accurate pricing of bail-in bonds may be difficult (T H Tröger, ‘Too Complex to Work: A Critical Assessment of the Bail-in Tool under the European Bank Recovery and Resolution Regime’, SAFE Working Paper No 179/2017). This may increase the attractiveness of covenants. Although inserted at the time of issuance of the debt, the rigour of the debt-holders’ use of their powers under the covenants can vary subsequently, as information about the resolution authorities’ use of their powers is revealed after issuance.
43 L Hornuf, M Reps, and S Schäferling, ‘Covenants in European Investment-grade Corporate Bonds’, Capital Markets Law Journal (2015), 10, 345.
44 For an example of the reluctance of trustees to act even when properly instructed by the requisite majority of bondholders, see Concord Trust v Law Debenture Trust Corporation plc  UKHL 27. The court commented that the issuers had ‘terrified the trustee into declining to accept the apparently mandatory obligation to the bondholders imposed by [the contract] and into acting as, in effect, their surrogate in the current proceedings.’
45 Y Amihud, K Garbade, and M Kahan, ‘A New Governance Structure for Corporate Bonds’ Stanford Law Review (1999), 51, 447.
47 The EBA Guidelines, n 35, are not specific on this issue.
50 Alternatively, with the cap in place, supervisors may regard it is relieving them of the responsibility to make active use of their discretionary powers.
51 L Bebchuk and H Spamann, ‘Regulating Bankers’ Pay’, Georgetown Law Journal (2010), 98, 247.
52 See further Section IV below.
53 Directive (EU) 2017/828.
54 EBA, ‘Guidelines on sound remuneration policies’ December 2015, 15.4.
57 CRD IV is of primary importance for bank regulation; so is Solvency II for insurance regulation. Many aspects of corporate governance of banks have parallels or may be even identical ones, for corporate governance of insurance firms. cf P Manes, ‘Corporate Governance, the Approach to Risk and the Insurance Industry under Solvency II’, in: M Andenas et al (eds), Solvency II: A Dynamic Challenge for the Insurance Market, Il Mulino, 2017, Ch IV, 93; M Siri, ‘Corporate Governance of Insurance Firms After Solvency II’, in: P Marano and M Siri (eds), Insurance Regulation in the European Union, Solvency II and Beyond, Palgrave Macmillan, 2017, Ch 7, 129.
58 German Act on Codetermination of the Workers of 4 May 1976. For details, see M Habersack, M Henssler, and P Ulmer, Mitbestimmungsrecht, 3rd ed, C H Beck, 2013.
59 See the plea for reform by Arbeitskreis ‘Unternehmerische Mitbestimmung’, ‘Entwurf einer Regelung zur Mitbestimmungsvereinbarung sowie zur Größe des mitbestimmten Aufsichtsrats’, Zeitschrift für Wirtschaftsrecht (ZIP) 2009, 885. Similarly S Thomsen, C Rose, and D Kronborg, ‘Employee Representation and Board Size in the Nordic Countries’, European Journal of Law and Economics (2016), 42, 471, 488: indirect support to sceptics, ‘employee representation as cost factor rather than a contribution to value creation’.
60 See the summarizing article by U Jirjahn, ‘Ökonomische Wirkungen der Mitbestimmung in Deutschland: Ein Update’, Schmollers Jahrbuch (2011), 131, 3–57; K Pistor, ‘Corporate Governance durch Mitbestimmung und Arbeitsmärkte’, in P Hommelhoff, K J Hopt, and A v Werder (eds), Handbuch Corporate Governance, 2nd ed, 2009, 231.
61 This is the widely held belief. But see recently K Lopatta, K Böttcher, and R Jaeschke, ‘When Labor Representatives Join Supervisory Boards: Empirical Evidence of the Relationship Between the Change to Parity Codetermination and Working Capital and Operating Cash Flows’, Journal of Business Economics (2018), 88, 1.
62 As to the controversy on whether labour representatives are ‘independent’, see K J Hopt, and M Roth in Großkommentar zum Aktiengesetz, 5th ed, De Gruyter, 2018, Article 100 comments, 176 et seq. Under the majority rule, neither the worker representatives who are working at the corporation nor trade union members are independent.
63 K Pistor, ‘The Mannesmann Executive Compensation Trial in Germany’, in C J Milhaupt and K Pistor, Law and Capitalism, University of Chicago Press, 2008, 69.
64 H Krüger, ‘Öffentliche Elemente der Unternehmensverfassung’, in H Coing and J H Kaiser, Planung V, Nomos 1971, 56 et seq. Cf also K J Hopt, Der Kapitalanlegerschutz im Recht der Banken, C. H. Beck 1975, 208 et seq, under the aspect of investor protection, 209 et seq, 212 et seq, 233.
65 E Rehbinder, ‘Unternehmenspublizität im Zeichen sozialer Verantwortung der Unternehmen’, in Festschrift für Baums, Mohr Siebeck, 2017, 959.
66 As to the negative Irish experience with public interest directors, see B Clark and G E Henderson, ‘Directors as Guardians of the Public Interest: Lessons from the Irish Banking Crisis’, Journal of Corporate Law Studies (2016), 16, 187.
67 e.g. J Hagendorff, ‘Corporate Governance in Banking’, in A N Berger, P Molyneux, and J O S Wilson (eds), The Oxford Handbook of Banking, 2nd ed, 2015, 139, 155; M Becht, ‘The Governance of Financial Institutions in Crisis’, in S Grundmann et al, Festschrift für Hopt, 2010, 1615, 1625 et seq.
68 Article 76 of the Stock Corporation Act and the majority of the commentaries, see, e.g.,J Koch in U. Hüffer, and J Koch, Aktiengesetz, 13th ed, 2018, Article 76 comments 28 et seq: plurality of interests, weighing of interests by the managing board.
69 Y-H Yeh, H Chung, and C-L Liu, ‘Committee Independence and Financial Institution Performance during the 2007-08 Credit Crunch: Evidence from a Multi-country Study’, Corporate Governance: An International Review (2011), 19, 437.
70 German Constitutional Court, 1 March 1979 (Labor Codetermination Decision), Decisions of the Constitutional Court, Vol 50, 290.
71 Already under the present law more mandatory diversity requirements are criticized because of this German particularity.
73 The recent Italian banking crisis and the experience with the near failure of the Monte dei Paschi in Siena gives a rather dim outlook on this.
76 K Johansen et al, ‘Inside or Outside Control of Banks? Evidence from the Composition of Supervisory Boards’, European Journal of Law and Economics (2017), 43, 31.
77 W-G. Ringe, ‘Changing Law and Ownership Patterns in Germany: Corporate Governance and the Erosion of Deutschland AG’, The American Journal of Comparative Law (2015) 63, 493.
78 See the references in Section I, n 9.
81 For Germany, Bank Supervision Act (KWG), Article 44, section 4.
82 e.g. German Financial Services Supervisory Act (FinDAG) 2002, Article 4, Section 4: The supervisory agency acts only in the public interest.
83 cf BCBS, ‘Guidelines: Corporate Governance Principles for Banks’, July 2015, Principle 5, 22 et seq: Governance of group structures; BCBS, ‘Joint Forum: Principles for the Supervision of Financial Conglomerates, September 2012. cf J -H. Binder, A Glos, and J Riepe (eds), Handbuch Bankenaufsichtsrecht, 2018, § 5: Grundsätze der konsolidierten Aufsicht über Gruppen.
84 K J Hopt, ‘Corporate Governance of Banks and Other Financial Institutions After the Financial Crisis’, Journal of Corporate Law Studies (2013), 219, at 239 et seq, see also Section I, n 1.
85 Armour et al, n 1, 389.
86 ibid, 378; J-H Binder et al, n 83, § 11 II.
87 Article 76(5) of CRD IV.
88 This is to be distinguished from transparency and disclosure to third parties or the general public.
89 Hopt and Roth, n 62, Article 93 comments, 288 et seq and Article 116 comments, 203 et seq.
90 Contra A Kokkinis, Corporate Law and Financial Instability, 2018, 188 et seq.
91 Article 92(1) of CRD IV on remuneration policies. Up to 25 per cent of variable compensation may be discounted for the purposes of the cap at a rate that the supervisors may set: Armour et al, n 1, 386. See also Article 94(1)(g)(iii).
92 As to the theory and problems of directors’ liability, there is a wide and controversial international discussion, cf P C Leyens and M C Faure, ‘Directors’ and Officers’ Liability: Economic Analysis’, ECGI Law Working Paper No 376/2017; H Spamann, ‘Monetary Liability for Breach of the Duty of Care?’ ECGI Law Working Paper No 300/2015, 5: a cost-benefit analysis tends to disfavour liability apart from specific situations. G Wagner, ‘Organhaftung im Interesse der Verhaltenssteuerung – Skizze eines Haftungsregimes’, Zeitschrift für das gesamte Handelsrecht und Wirtschaftsrecht (ZHR) (2014), 178, 227.
93 BCBS, July 2015: International Association of Insurance Supervisors, November 2015; Swiss FINMA, September 2016; German BaFin, November 2016; FSB, April 2017; Joint ESMA and EBA Guidelines, 26 September 2017, etc.
94 See most recently J-H Binder, ‘Der Aufsichtsrat von Kreditinstituten drei Jahre nach dem “Regulierungstsunami” – eine Bestandsaufnahme’, Zeitschrift für Unternehmens- und Gesellschaftsrecht (ZGR) (2018), 88.
95 German BaFin, ‘Merkblatt zu den Mitgliedern von Verwaltungs- und Aufsichtsorganen gemäß KWG und KAGB’, 4 April 2016.
96 As to the relationship between corporate law and bank supervisory law, see Binder, n 94, 88, 116 et seq.
97 Armour et al, n 1, 389 and n 90. See also I H-Y Chiu, ‘Regulatory Duties for Directors in the Financial Services Sector and Directors’ Duties in Company Law: Bifurcation and Interfaces’, Journal of Business Law (2016), 465.
98 Binder, n 94, 88, 123. Contra Kokkinis, n 90, 170, 181.
99 Criminal proceedings have been instituted after the financial crisis in a number of countries, apart from Germany and the United Kingdom (there against the former CEO and three other former top executives of Barclays Capital). This has occurred, for example, in the United States, Greece, and in particular Iceland, where the CEOs, other top and former CEOs, and even majority shareholders of the three largest failed banks were convicted of fraud and market manipulation. See Steven L Schwarcz, Aleaha Jones, and Jiazhen Yan, Chapter 7, this volume.
100 German Bundesgerichtshof, decision of 12 October 2016, Zeitschrift für Wirtschaftsrecht (ZIP) (2016), 2467.
101 Financial Services (Banking Reform) Act 2013, Chapter 33, Section 36. See Section II, n 23.
102 Experience shows that even informal coordination among different civil law senates at the Bundesgerichtshof, say between the corporate law senate and the banking law senate or the insolvency law senate, is difficult.
103 Kokkinis, n 90, 135 et seq, 169 fears that enforcement will be too difficult and criticizes the need for causation and gross negligence.
104 J R Macey and M O’Hara, ‘The Corporate Governance of Banks’ Economic Policy Review (FRBNY) (2003), 9, 91, 102 et seq, 107 et seq.
105 Steven L Schwarcz, Aleaha Jones, and Jiazhen Yan, Chapter 7, this volume, with further references. See Section I, n 14 for the Royal Bank of Scotland case.
106 In detail, see J-H Binder, ‘Organisationspflichten und das Finanzdiensleistungs-Unternehmensrecht: Bestandsaufnahme, Probleme, Konsequenzen’, Zeitschrift für Unternehmens- und Gesellschaftsrecht (ZGR) (2015), 667. For the United States, see Litwin v Allen, 25 N Y 2d 667, 668, Sup Ct, 1940).
107 cf for German law, Hopt and Roth, n 62, § 93 comments, 370 et seq.; for UK law, cf Kokkinis, n 90, 177.
108 K J Hopt, ‘Responsibility of Banks and Their Directors, Including Liability and Enforcement’, in L Gorton, J Kleineman, and H Wibom (eds), Functional or dysfunctional—the law as a cure? Risk and liability in the financial markets, , 2014, 159; K J Hopt, ‘Die Verantwortlichkeit von Vorstand und Aufsichtsrat’, Zeitschrift für Wirtschaftsrecht (ZIP) (2013), 1793, 1793–1794 with recent case law. cf H C Grigoleit, ‘Directors’ Liability and Enforcement Mechanisms from the German Perspective—General Structure and Key Issues’, in H Fleischer et al (eds), German and Asian Perspectives on Company Law, 2016, 105, under IV: overly rigorous set of liability rules.
109 German Bundesgerichtshof, decision of 21 April 1997, Arag v Garmenbeck, Decisions of the Bundesgerichtshof, Vol 135, 244.
110 Frankfurter Allgemeine Zeitung, 12 January 2018, No 10, 17; Handelsblatt, 11 January 2018, No 8, 30.
111 A Hamdani, ‘Bank Directors: Duties Towards the Public?’, lecture, Society of European Contract Law (SECOLA), 16–17 June 2017, Bocconi University.
112 Contra Kokkinis, n 90, 170 et seq.
113 See Section IV, n 66. For the more recent version of the enlightened shareholder interest approach, see A Keay, The Enlightened Shareholder Value Principle and Corporate Governance, 2013.
114 cf BCBS, Guidelines, n 83, 3, Introduction No 2: ‘The primary objective of corporate governance should be safeguarding stakeholders’ interest in conformity with public interest on a sustainable basis. Among stakeholders, particularly with respect to retail banks, shareholders’ interest would be secondary to depositors’ interest.’ See K J Hopt, ‘Corporate Governance von Finanzinstituten, Empirische Befunde, Theorie und Fragen in den Rechts- und Wirtschaftswissenschaften’, Zeitschrift für Unternehmens- und Gesellschaftsrecht (ZGR) (2017), 438, 446 et seq. Same proposal by Kokkinis, n 90, 183.
115 This knowledge and experience is key, also in comparison to independence; see J de Haan and R Vlahu, ‘Corporate Governance of Banks: A Survey’, Journal of Economic Surveys (2016), 30, 228, 250 et seq; Binder, n 94, 88, 101 et seq.
117 Macey and O’Hara, n 104, 102 et seq.
118 cf German Corporate Governance Code as of 7 February 2017, s 5.4.1: ‘The Supervisory Board has to be composed in such a way that its members as a group possess the knowledge, ability and expert experience required to properly complete its tasks.’ (emphasis added).
119 For details, see Hopt and Roth, n 62, Article 93 comments, 66–131.
120 J Armour and J Gordon, ‘Systemic Harms and Shareholder Value’, Journal of Legal Analysis (2014), 6, 35, 39 et seq, and same, ECGI Law Working Paper No 222/2014.
121 Armour et al, n 1, 379.
122 G Ferrarini, ‘Understanding the Role of Corporate Governance in Financial Institutions: A Research Agenda’, ECGI Law Working Paper No 347/2017, 7, 21 et seq, also referring to the case in the Delaware Court of Chancery; Hamdani, n 11, and T. Tröger, ‘Managers’ Duties Towards Shareholders and Debtholders’, lecture, Society of European Contract Law (SECOLA), 16–17 June 2017, Bocconi University.
123 See Section II, n 25. Contra Kokkinis, n 90, 176. See the detailed discussion on this issue in Australia: M Legg and D Jordan, ‘The Australian Business Judgment Rule After ASIC v Rich: Balancing Director Authority and Accountability’, Adelaide Law Review (2014), 34, 403.
124 German Stock Corporation Act, Article 93.
125 See K J Hopt, ‘Die Reform der Organhaftung nach § 93 AktG’, in T Ackermann and J Köndgen, (eds), Privat- und Wirtschaftsrecht in Europa, Festschrift für Wulf-Henning Roth, 2015, 225, 232 et seq.
126 Kokkinis, n 90, 169 et seq.
127 ibid, 172; but also for an amendment of the wrongful trading and disqualification provisions, 183 et seq. As to wrongful trading, see P L Davies and S Worthington, Gower Principles of Modern Company Law, 10th ed, 2016, s 9-6 et seq. For a comparison with German law, see F Steffek, Gläubigerschutz in der Kapitalgesellschaft, 2011.
128 Article L. 651-2 of the French Code de commerce (formerly: action en comblement du passif). cf M Cozian, A Viandier, and F Deboissy, Droit des sociétés, 30e éd, 2017, 422 et seq, 2057 et seq.
129 See Section II for the United Kingdom.
130 BCBS, Guidelines, n 83, Principle 4: senior management.
132 I H-Y Chiu, ‘Comparing Directors’ Duties in the Financial Services Sector with Regulatory Duties under the Senior Persons Regime – Some Critical Observations’, European Business Law Review (2016), 27, 261, 278 et seq. Contra Kokkinis, n 90, 173 et seq, who proposes to extend section 36 of the UK Financial Services (Bank Reform) Act 2013 (see Section V.2) to a civil law responsibility for both directors and senior managers. Yet in this context one should be aware that the dividing line between directors and senior managers differs: in the United Kingdom, apart from the CEO, the board consists nearly exclusively of non-executive directors, while in Germany all of the managing board directors are executive members. As to separate rules for directors and senior managers in the UK, see Davies and Worthington, n 127, s. 16–11.
133 As to the growing role of directors’ organizational duties, see for credit institutions, Binder, n 94, 88; for general non-bank directors, Hopt and Roth, n 62, Article 93 comments, 182 et seq. For the United Kingdom, see Chiu, n 97, 465; Kokkinis, n 90, 176 et seq.
134 H Hansmann and R Kraakman, ‘Toward Unlimited Shareholder Liability for Corporate Torts’, Yale Law Journal (1991), 100, 1879; N A Mendelson, ‘A Control-Based Approach to Shareholder Liability for Corporate Torts’, Columbia Law Review (2002), 102, 1203. See also R Kraakman et al., The Anatomy of Corporate Law, 3rd ed, 2017, 1.1.2 (limited liability), 18.104.22.168 (externalities, non-adjusting creditors).
135 Still in the National Banking Act of 1863 and partially elsewhere until 1935; J R Macey and G P Miller, ‘Double Liability of Bank Shareholders: History and Implications’, Wake Forest Law Review (1992), 27, 31, 36.
136 C Hill and R Painter, ‘Berle’s Vision Beyond Shareholder Interests: Why Investment Bankers Should Have (Some) Personal Liability’, Seattle University Law Review (2010), 33, 1173.
137 S L Schwarcz, ‘The Governance Structure of Shadow Banking: Rethinking Assumptions About Limited Liability’, Notre Dame Law Review (2014), 90, 1.
138 Pursuant to the above-mentioned decision of the German Bundesgerichtshof, ARAG v Garmenbeck.
139 cf 69th German Lawyers’ Association (Deutscher Juristentag), Munich 2012, Resolution No 22 and the discussion at the meeting before, insofar as the expert opinion of M Habersack was not followed.
140 Armour et al, n 1, 389.
141 I H-Y. Chiu, ‘Operationalising a stakeholder conception in company law’, Law and Financial Markets Review (2016), 10, 173.
142 Ferrarini, n 122, 2: favouring cautious deregulation, 24 et seq.
143 C Zilioli, Director General of Legal Services of the European Central Bank, ‘Advances in Corporate Governance: Financial Corporations’, lecture at the Hertie School of Governance, Berlin 20 February 2018. Curiously enough, in its supervisory capacity, the ECB has to apply the national supervisory laws of nineteen Member States.
144 This is also a problem for the ECB for its task of bank supervision under national supervisory law.
145 This is the conclusion of Zilioli, n 143.
146 M T Moore, ‘Redressing Risk Oversight Failure in UK and US Listed Companies: Lessons from the RBS and Citigroup Litigation’, European Business Organization Law Review (2017), 18, 733.
147 From a comparative law perspective, this is similar in France, where civil claimants use the information extracted in the corresponding prior criminal lawsuit, and more generally in those countries where corporate law provides for a special inquiry by experts which the court may grant at the application of shareholders. See also Kokkinis, n 90, 182, who argues for a mandatory in-depth inquiry by an independent committee in each case of financial institution failure.
148 Australian Securities and Investments Commission (ASIC) Act 2001 (Cth), section 50. For details, see I Ramsay, ‘Increased Corporate Governance Powers of Shareholders and Regulators and the Role of the Corporate Regulator in Enforcing Duties Owed by Corporate Directors and Managers’, European Business Law Review (2015), 26, 49, 63 et seq; J J du Plessis and N Cordes, ‘Claiming Damages from Members of Management Boards in Germany: Time for a Radical Rethink and Possible Lessons from Down Under?’, unpublished manuscript, 2017, 23 et seq, 29 et seq.
149 U H Schneider with a motion at the 69th German Lawyers’ Association; Chiu, n 141, 185 without mentioning the Australian experience.
150 69th German Lawyers’ Association, n 139, Resolution No 17; cf Hopt, n 125, 237 et seq.
151 There may be a role for regulators in securing private redress as part of the settlement of a regulatory action as in the Tesco case in the United Kingdom.