In particular, boards and senior managements of banks have to be sensitive to the interests of the depositors, be aware of the potentially destructive consequences of excessive risk taking, be alert to warning signals and be wise enough to contain irrational exuberance. Post-crisis, there is a debate on the extent to which failure of corporate governance has been responsible for the crisis.
Given such overwhelming evidence of corporate governance failure, this is a futile debate. The short point is this. If the directors on the boards of banks didn’t know what was going on, they should ask themselves if they were fit enough to be directors. If they did know and didn’t stop it, they were complicit in the recklessness and fraud.