The role of boards of directors in the financial crisis

In the wake of the 2008 financial crisis, Wall Street bankers, government regulators, academics, and the general public all asked one simple question: "Why?" The answer to this question is important to the task of figuring out how to prevent such an event from happening again. Some have ar...

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Bibliographic Details
Published in:The CPA journal (1975) 2011-09, Vol.81 (9), p.54
Main Authors: Castellano, Joseph F, Lightle, Susan S, Baker, Bud
Format: Article
Language:English
Subjects:
Banking industry
Boards of directors
Central banks
Economic crisis
Enterprise risk management
Fiduciary responsibility
Financial institutions
Management
Methods
Powers and duties
Return on assets
Risk management
Roles
Subprime lending
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Summary:In the wake of the 2008 financial crisis, Wall Street bankers, government regulators, academics, and the general public all asked one simple question: "Why?" The answer to this question is important to the task of figuring out how to prevent such an event from happening again. Some have argued that the financial crisis resulted -- at least in part -- from poor risk management by US financial institutions. This observation has led to a call for more active engagement of boards of directors in the risk management process, as well as for the selection of board members who have the relevant industry-specific experience necessary to effectively meet that responsibility. In his speech, "Lessons of the Financial Crisis for Banking Supervision," Federal Reserve Chairman Ben S. Bernanke discussed ways to strengthen the banking system and mitigate future crises. The business environment is a complex system, and nowhere is that complexity more evident than when evaluating the myriad duties and workings of boards of directors.
ISSN:0732-8435