Fed official: Hold bank directors responsible for regulatory goals

by Ryan Smith10 Jun 2014
Bank directors should be held responsible for meeting their companies’ regulatory goals, a top Federal Reserve official said Monday.

Federal Reserve Governor Daniel Tarullo said in a speech that expanding the responsibilities of bank directors would require changes in corporate law beyond the authority of the Fed, Reuters reported.

But those changes could make bank directors think more about the long-term health of the bank and the economy than the short-term desires of shareholders, he said. And such changes would also make it easier for bank directors to be held legally responsible for financial intistutions’ shady dealings.

“And, of course, the courts would thereby be available as another route for managing the divergence between private and social interests in risk-taking,” Tarullo said.

While the Dodd-Frank Act makes it illegal to bail out failing banks with taxpayer cash, many politicians insist that Wall Street financial institutions should be shrunk to minimize the risks they pose to the economy, according to Reuters.
 

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