Opinion

How safe are banks with part-time outsiders running their boards?

Rules that mandate a majority of ‘independent’ bank directors could be increasing the risk of another global financial crisis.

Dietmar Leisen and Peter Swan

Mar 21, 2023 – 3.18pm

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In Australia, the four major banks have only “independent” directors plus the CEO on their boards. The Commonwealth Bank board has nine outside directors, NAB eight, Westpac nine, and ANZ seven.

The failed Silicon Valley Bank (SVB) – the second-largest bank collapse in US history – had 11 outsiders plus the CEO. Credit Suisse’s diverse board is composed entirely of 12 outsiders. Day-to-day operations are run by the CEO and 10 other executives.

Dietmar Leisen is Professor of Banking of University of Mainz

Professor Peter Swan is professor of finance at UNSW Business School.