WASHINGTON, June 9 (Reuters) - Making bank directors responsible for regulatory goals as part of their fiduciary duties could help make the financial system safer, a top U.S. bank regulator said on Monday.
Expanding the fiduciary duties of bank boards would require a change in corporate law, and was something beyond the authority of the central bank, Federal Reserve Governor Daniel Tarullo said in a speech.
But the change could make bank directors more aware of the impact of their risk-taking decisions on the viability of the bank - and not so much the short-term interests of shareholders - and the health of the economy.
Such a measure would also make it easier to hold bank managers responsible in court, said Tarullo, who is responsible for bank supervision at the Fed.
“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 in notes prepared for speaking to law professionals.
Tarullo has introduced tough new rules for banks that go well beyond what has been agreed in the global Basel III rules for bank capital, after the 2007-09 crisis forced costly public bail-outs of some of the biggest lenders.
The Dodd-Frank law makes it illegal to rescue ailing banks with taxpayer dollars, but there is still pressure from some politicians to cut down the size of Wall Street banks and reduce the risk they pose to the economy.
There is also widespread criticism because no senior bankers have been jailed after the credit meltdown. (Reporting by Douwe Miedema; Editing by Andrea Ricci)