Aims and Approach to Examining the Governance of Banks in the Global Financial Crisis and Beyond to the Australian Banking Royal Commission Inquiry into Banking Misconduct in Stage 2

Francesco de Zwart
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Francesco de Zwart: University of Adelaide

Chapter Chapter 1 in The Key Code and Advanced Handbook for the Governance and Supervision of Banks in Australia, 2022, pp 3-23 from Springer

Abstract: Abstract The Stage 1 Relational Corporate Governance Approach Model explained how thirty-nine governance mechanisms, structures, processes and protocols called ‘governance variables’ affected ‘agency costs’ and the long-term efficiency and survival or sustainability of the firm. This survival/sustainability was measured by proxies for shareholder wealth or welfare including firm cost of capital, firm value/share price, firm operating performance/profit and the likelihood of earnings manipulation or ‘management’. The Stage 1 Model was not tied to any particular industry and applied to firms generally. The thirty-nine Stage 1 governance variables were extracted from the literature, case studies, governance codes and empirical studies comprising the four original ‘Key Fields’: (1) the application of the theoretical models of the firm to the relational approach; (2) Enron and Hastie corporate collapse literature; (3) international and national governance codes of the US, UK and Australia and (4) empirical/field studies actually undertaken by other commentators and researchers in examining the effectiveness or ability of the governance variables in reducing agency costs, enhancing firm value/share price and operating performance/profit and reducing the likelihood of earnings management/misstatement. This Stage 2 Key Code and Advanced Handbook 2 applies the Relational Model to the Global Financial Crises and the banking and financial services industry in a new Key Field – the ‘Governance of Banks in the GFC and Beyond’ Key Field No. 5. This fifth Key Field examines the behaviour and failures of governance variables relating to banks and financial firms in the GFC of 2008–9 and beyond to the recent Australian Banking Royal Commission Inquiry into banking misconduct. All the bank-specific governance variables – 1749 in number – are modelled or based on, or derived from, seven ‘Key’ or ‘Core’ governance variables from the original thirty-nine variables of Stage 1. This Stage 2 Key Code and Advanced Handbook indexes and examines major reports and pronouncements from the GFC and beyond to propose a uniform approach to governance and supervision for major banks in Australia. An important element is to bring together major reports and pronouncements in Australia to propose a uniform approach for banks, in particular in relation to governance, accountability, remuneration, board characteristics, committees, conduct and other non-financial risks, bank and risk culture and the governance and management of risk. In this Chap. 1, the Key Code and Advanced Handbook introduces the major reports and pronouncements from the GFC and beyond which are indexed and modelled throughout the Key Code. As part of this, the seven ‘Key’ or ‘Core’ governance variables from the original thirty-nine variables of Stage 1 are introduced. Also introduced are the ‘Key Groupings’ of the Stage 2 Bank-Specific Governance Variables for Australian Banks. These Key Groupings are the prefixes or abbreviations – spanning one-hundred and fifty-nine (159) categories – in which the Key Code is classified or divided to represent the functions of the bank at the basic activity level.

Keywords: Aims and approach; Stage 2 Relational Corporate Governance Approach; Key code; Advanced handbook; Stage 2 Reports and Publications; Core themes; Emerging themes; Non-financial risk; Key Groupings; Accountability Mapping (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-981-16-1710-2_1

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DOI: 10.1007/978-981-16-1710-2_1

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