A central theme in the outpouring of analysis on the causes of the global financial crisis is that large financial institutions created substantial amounts of systemic risk, which then was realised and nearly brought down the global financial system. Put in terms of corporate governance, two possibilities emerge. The management of large financial institutions was disloyal to shareholders, the agents taking more risk than their principals desired, perhaps encouraged by highly incentivised compensation schemes. Alternatively, management loyally took on excessive risk, benefiting the shareholders and externalising the costs to the public.

The first possibility suggests a traditional corporate governance response focusing on shareholders rights, in addition to reform of prudential regulation. The second possibility suggests greater emphasis on regulation, but with the possibility that the corporate governance system could be redesigned to internalise more systemic risk and to provide better protection for creditors. In both cases, there is a need for a stronger resolution authority.

What is the role of corporate governance in financial system reform? Are corporate governance and the new Financial Regulation complements or substitutes? If complements, how do we design their interaction? Speakers at the TCGD Conference addressed many of these points in following sessions: Session 1- Prevention, Session 2 - Conference keynote speeches, Session 3 - Early Intervention and Resolution, Session 4 - Summing up, Assessment and the Way Ahead.

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