A theme running through these remarks will be the centrality of risk – its assessment, assumption, and allocation – in understanding the relationship between corporate governance and financial regulation. Financial firms and corporate governance There are at least three significant ways in which the nature of financial activities and regulation affect the operation of key mechanisms of corporate governance.
1 First, it has long been recognized that the unique features of deposit-taking financial institutions raise the question whether generally applicable corporate law and governance principles are adequate. Because banks are financial intermediaries that use deposits to provide much, if not most, of the funding for their lending, an insolvent bank may well be unable to satisfy all its deposit liabilities.