Post-crisis reforms to the UK regulation of the corporate governance of banking institutions: an analysis of changes to the UK risk governance framework

Abstract

This thesis focuses on the UK regulations related to the risk governance of banking institutions. Risk governance is a subset of corporate governance arrangements that is designed to ensure the safety and stability of a bank. Flawed risk governance was one of the key reasons for the failures of a number of financial institutions during the 2008 crisis. This thesis aims to answer the following question: Are the reforms to the UK regulation of the corporate governance of banking institutions likely to improve the effectiveness of banks’ risk governance arrangements? The research outcomes suggest that a rejection of the neoclassical understanding of corporate governance and its regulation is essential, in order to ensure the effectiveness of the risk governance of banking institutions. The thesis highlights the flawed assumptions that underline the mainstream corporate governance theories and regulation based on these theories. It is argued that corporate governance theory and regulation would greatly benefit from adopting the insights of the organisational and behavioural sciences. The importance of organisational and behavioural influences for the risk governance of banking institutions is demonstrated in the case studies, which analyse the risk governance failures of HBOS, RBS, and Citigroup. The UK reforms concerning the regulation of risk governance are analysed in this context. The reforms analysed include the relevant parts of the post-crisis financial regulation reform and the more recent changes to the general UK corporate governance framework. The analysis shows that the risk governance rules that form a part of the financial regulation reform demonstrate a significant departure from the pre-crisis regime. The new regime does not seem to be informed by the assumptions of neoclassical economic theory, which is likely to improve the effectiveness of risk governance. However, the UK corporate governance framework is still primarily based on the neoclassical understanding of corporate governance, which is likely to undermine the intention of regulators to promote long-termism and curb risk-taking.

Date of Award	1 Aug 2019
Original language	English
Awarding Institution	The University of Manchester
Supervisor	David Booton (Supervisor) & Vincenzo Bavoso (Supervisor)