Banking StandardsWritten evidence from Professor David G Mayes, University of Auckland BNZ Professor of Finance, Department of Accounting and Finance. I was Chief Manager in the Reserve Bank of New Zealand when the new regulatory regime for banks was introduced in 1996 but my responsibility at the time was for monetary policy not banking supervision. The views expressed here are purely personal.

Incentives for more Prudent Bank Behaviour: Evidence from New Zealand

1. This note provides some evidence from experience in New Zealand with a rather different regime for improving prudential behaviour in banks to assist the Parliamentary Commission on Banking Standards in its deliberations over how beneficial changes might be made in the UK.

2. There have been no bank failures in the global financial crisis in New Zealand, nor has any bank behaved in a manner that has provided a serious threat to its own liability or that of the financial system. The obvious questions to ask are: Was that because of the regulatory system or despite it? Are their lessons that can be learned from this experience despite New Zealand’s unusual financial structure, with a banking system that is not only almost entirely foreign owned but owned by banks in a single country, Australia? Is this experience purely the result of the limited exposure of the New Zealand financial system to the economic downturn and the financial problems in other markets? Is it merely a tribute to the relatively strong but conventional supervisory regime that was introduced in Australia following the Wallis Review?

3. To pre-empt the discussion, the general conclusion is that there has been no test of how the New Zealand regime might have behaved had it been exposed to the opportunities and challenges that existed in the UK, US and elsewhere in Europe over the last decade but that a number of advantages and disadvantages in the regime have been revealed that provide important lessons for others.

Because New Zealand applies the concept of strict liability in cases related to disclosure documents by financial institutions, non-executive finance company directors have been successfully prosecuted for misleading disclosures even though they may not have aware of what had been was being done in the company. This gives a strong incentive to non-executive directors to ensure that they are fully aware of the activities of their companies.

The fact that the large majority of deposit taking finance companies in New Zealand failed during the first decade of this century suggests that the threat of custodial sentences is insufficient on its own to encourage prudence by directors.

Given the number of successful prosecutions as a result of the failures, including the conferral of custodial sentences, the incentives for prudence may now be much greater.


4. In the mid-1990s New Zealand undertook a careful review of experience round the world as it responded to the widespread concern, reflected in the Basel Committee’s work, that the prudential regulation of banks should be improved to increase the stability of the financial system as a whole and that of individual institutions within it. As a result of that review New Zealand introduced a new regime at the beginning of 1996, which was clearly different from that elsewhere in the OECD, being based on extensive disclosure, market discipline and harsh penalties for bank directors including civil liability in the event failures to disclose (set out in the Banking Supervision Handbook).

5. The regime had a second feature of relevance to the Commission as it treated those who wished to call themselves “banks” differently from other deposit-taking institutions who did not want use that name. Those institutions were subject to a light set of controls, also based on disclosure requirements, but with no special prudential regulation or concerns for any threat to the viability of the overall financial system. The main group of such non-bank deposit-taking institutions, finance companies, which formed only around 5% of the total deposit base “failed” in way or another, mainly before the global financial crisis. That regime was discredited, several of the directors have been successfully prosecuted, some are in prison at present, and the regime is being changed. However, there was no threat to the overall financial system.

6. There is one further aspect of the New Zealand arrangements worth highlighting at the outset. Unlike all the other OECD countries, New Zealand does not have deposit insurance, nor did it have it in the run up to the global financial crisis. It did introduce a temporary Crown Retail Deposit Guarantee Scheme in October 2008 (which was substantially reduced in 2010 and abolished in 2011) but this was largely disastrous, contributing to increasing the losses of the finance companies and hence to the taxpayer. The reasons for this, briefly mentioned below and set out in the Auditor-General’s Review of the scheme,2 are not germane to the Commission’s enquiry but the non-existence of deposit insurance is.

7. It is normally argued that while deposit insurance protects those who are not well-informed enough to assess the risks their banks are running and reduces the chances of a panic, it also increases the incentive for banks to take increased risk and to have weaker risk management. The New Zealand authorities have argued that by not having deposit insurance they have reduced this moral hazard and this helps contribute to the prudential behaviour of banks.

Forms of Incentive

8. It is normally argued that the best incentives for prudence exist when the directors of companies acting in their own self-interest have incentives that are well aligned with those of the principal stakeholders. In the present case the relevant stakeholders being the shareholders, depositors and the authorities acting on behalf of society at large. While the discussion is often restricted to remuneration, trying to ensure that contingent rewards reflect longer term share price performance, it applies more generally. The three stakeholder groups do not necessarily have compatible objectives and much of the problem is to achieve an appropriate balance. However, achieving this balance is not a problem unique to New Zealand. While recent emphasis has moved first in favour of depositors and more recently in favour of society at large, it is the shareholders who potentially have the potential for continuing control rather than simply setting boundaries for behaviour.

9. If incentives in a positive sense are insufficient then the normal response is to add a system of explicit penalties to back them up. Penalties have to be thoughtfully designed to be effective. It is usually not possible to provide anything much in the way of restitution from directors and with limited liability there is no means of repaying creditors and depositors in particular from shareholders. Custodial sentences are therefore normally needed to prevent directors from being able to protect their gains and avoid sharing in the losses in any material sense.

10. Beyond the positive and negative incentives there is the issue about what to do if the incentives fail. Penalties will not deter if the perpetrators do not believe that the penalties will be imposed or if they believe that they are unlikely to be found guilty or indeed will probably not be prosecuted. Such beliefs will remain contingent until there is a financial crisis or a generally applicable failure of an individual institution to which the other banks can relate. Since the intention of policy is to avoid both such events there is an inherent difficulty in obtaining a clear salutary message.

11. The New Zealand system does offer a rather greater incentive than many in this regard as it imposes strict liability on failures of disclosure. Thus it is not a defence for directors to say that they were unaware of problems that led to incorrect disclosures. Nor does the prosecution have to show that there was any deliberate attempt on the part of directors to mislead investors. The only requirement is to prove that the disclosures were erroneous, then the directors are liable. This places a substantial burden on non-executive directors to very clear about what the firm is doing and why. In general this is not an unreasonable burden on non-executive directors as they, like the executives, should be sufficiently conversant with the activities of the bank.

12. The problem that some such directors face is that they have been appointed to give respectability to a financial institution. They are well known public figures in whom the public has confidence. This is akin to using well known people, such as newsreaders, in advertising. The ordinary public assumes that such endorsement would only be offered if the personality had been convinced that the products and the risk management were of a very high quality. The practice is of course different as such publicity is a job, which is rewarded. The successful prosecution of directors after the failure of Nathans Finance, included two former ministers of justice. In passing judgement it was recorded that there was no suggestion that the two directors had been anything other than honest. They had simply not found out what the company was doing nor the true state of its affairs. They were thus in this sense negligent and hence liable.

13. There was a fear when the new supervisory regime was introduced in 1996 that the prospective penalties on non-executive directors would mean that no one would be willing to take on the job. In practice this was by no means true—existing directors were prepared to continue and there was no shortage of willing applicants to fill any vacancies. However, since there have been no bank failures it is difficult to decide whether non-executive directors simply believed that banks were well run or whether they felt that the scrutiny they would exercise as directors would be sufficient to avoid them every being caught out and endorsing incorrect dislosures.

The Resolution Regime

14. Probably the most important incentive to prudent behaviour by directors lies in what will happen if the bank were to get into difficulty or be deemed by the authorities to have failed. If those involved can expect to lose their jobs and shareholders can be expect to be wiped out, along with some of the more junior creditors, there are considerable incentives for the members of all of these groups to try to avoid getting into such difficulties in the first place.

15. Right from the outset of the new regime in New Zealand, it was made clear that the special insolvency regime embodied in the 1989 Reserve Bank Act would be applied, whereby a statutory manager (the equivalent of a receiver) would be appointed in the event that a bank was thought unable to continue as an adequately capitalised and safe institution. Initially the resolution process was not fully spelled out but it was clear that this would involve the taking of control away from the directors and shareholders. In the resolution shareholders would either see their shares written down to zero or would receive only a small payment to cover the estimated residual value and the directors would lose their jobs in the takeover by the statutory manager under the control by the Reserve Bank.

16. Over the succeeding years, the intention has become clearer, first with the development of the idea of “Bank Creditor Recapitalisation” and in 2011 with the exposition of “Open Bank Resolution” (OBR).3 Under this regime, any bank, whether of systemic importance or not and whether foreign-owned or not can be resolved within the trading day, so that it never closes for business. Furthermore, it is creditors’ funds, in increasing order of priority that are used to recapitalise the bank and not taxpayer funds. Although a government guarantee is likely to be required against any future losses while the bank continues to operate under statutory management. (The taxpayer would also be liable if the statutory manager failed to write down creditors sufficiently to enable the bank to be recapitalised and returned to private ownership.)

17. The key steps for making this plausible are:

all systemic banks must be locally incorporated and capitalised subsidiaries, with separate boards, so that the can legally be subject to statutory management;

all such subsidiaries must be capable of running themselves independent of their parents (and other key suppliers) within the trading day, so that they can be resolved in practice as well as in law;

it must be possible for the statutory manager to be able to value the bank adequately so that the creditors can be written down within the trading day sufficiently to restore capitalisation;

it must be practically possible to split all accounts or other claims on the bank into their active and continuing component and their written down and hence frozen component and that the continuing component can continue to be accessed by the end of the trading day.

18. If the four key steps listed above are not though plausible then shareholders and directors alike will have doubts about whether the regime will actually be applied and hence may be inclined to act less prudently. Even if all these practical concerns do seem to have been addressed in a manner that is credible for the directors, there is still the concern over whether this would be politically acceptable especially in a crisis. Since New Zealand does not have deposit insurance or depositor preference, depositors will have to be written down, possible substantially, to restore capitalisation. Such a writedown in the case of a large bank may be politically infeasible as these depositors are also electors. The Reserve Bank expects that there will be some de minimis limit below which deposits are not written down but if this carve out is large then the pressure on the remaining creditors will be that much harsher and their losses greater.

19. In any case at the height of the crisis in October 2008, New Zealand introduced a temporary Crown Retail Deposit Guarantee Scheme. Depositors, and directors could therefore be forgiven for believing that New Zealand had implicit deposit insurance and hence that troubled banks might be kept going despite the extensive rhetoric to the contrary beforehand.

20. Secondly, this pays no regard to the likely behaviour of the authorities in Australia, where the parent banks are incorporated. There, they do have both deposit insurance and domestic depositor preference. Is it going to appear plausible that depositors in the two countries should be treated so differently in the event of a failure? It is reasonable to suggest that some doubt will remain.

21. While the position in the UK is clearly different, the same principles apply. Is it really going to appear credible to bank directors that they will not be able to survive the realisation of substantial risks? Will living wills and funeral plans actually work? Will it be possible to get sufficient coordination among regulator across borders? None of these will generate an unequivocal response. The task is to make them more plausible as soon as possible.

The Global Financial Crisis

22. New Zealand and particularly Australia were not very heavily affected by the global financial crisis. Australia did not even experience a recession in the sense of two consecutive quarters of falling GDP. While New Zealand did experience a recession and like many other countries discovered as a result that its fiscal policy stance was wrongly calibrated, resulting in large deficits that are not projected to disappear until 2015, it started from low indebtedness and has not had to reduce interest rates below 2.5% in order to maintain inflation in its 1–3% target band. As a result the main banks have not been seriously challenged, non-performing loans have not risen particularly strikingly and property prices have recovered from initial declines. With only limited increases in unemployment, it has therefore, fortunately, not been possible to find out empirically how well the banking system would hold up under the sorts of threats that have occurred in the US and Europe.

23. Similarly the main banks, whether in Australia or New Zealand did not participate in the sorts of derivative markets that have given the problems elsewhere. It is suggested by the Shadow Financial Regulatory Committee, among others that this was because there was not the same pressure on returns as elsewhere. Traditional banking business was doing well and there was no need for an aggressive search for higher yields by going into unfamiliar and higher risk areas. We therefore cannot infer that the banks in Australia and New Zealand would not have been equally aggressive if they had been faced by the same circumstances.

24. It is not possible to find some ready indicator which suggests that the behaviour of bankers in similar circumstances is some how different from those in the UK. Australian banks are modestly international and have operated in the UK and indeed Lloyds TSB used to own the National Bank of New Zealand, one of the five main banks, until the early part of the twenty-first century. However, the Australian Prudential Authority (APRA) has prided itself in the quality of its supervisory standards and would no doubt like to think that this was responsible in part for the prudence.

25. Nevertheless, APRA has also had its own problems and experienced some unfortunate failings in the insurance industry. One would therefore have to be rather cautious in attributing the prudence of the banks too firmly to the regulatory regime. Indeed, despite the fact that the regulatory regimes in New Zealand and Australia have been clearly different over the period, there has been no obvious difference in behaviour between the Australian and New Zealand parts of the banks. One might attribute that to a strong ethos that applies throughout the organisation. It has been common not just for Australians to run the New Zealand subsidiaries but for New Zealanders to run the entire banking group in Australia (the current and previous CEOs of Commonwealth Bank are New Zealanders).

26. While it is traditional for both countries to stress their own merits relative to their neighbours, it is clear that with their common heritage and single labour market they are more characterised by similarity than difference. Corporate governance standards are not particularly strong and to a large extent self-enforced rather than embodied in a strong legal framework. However, in the larger companies there has been a clear emphasis on transparency, aided by the importance of the disclosure regime. Smaller companies, as in other countries, can be less well governed and the representation of external shareholders can be weak. The performance of shareholders in New Zealand has been particularly criticised and it has only been with the setting up of the New Zealand Shareholders Association—purely through the actions of some small but vocal shareholders—that there has been any more widespread appreciation of shareholder rights and how these might be exercised.

27. A feature of governance which is clear in New Zealand, as elsewhere, is that while market discipline in theory should exercise considerable control over how directors behave it does not do so in practice. Not merely do shareholders tend to be relatively passive both in exercising their rights and simply in selling (and buying) their shares but the market for corporate control is relatively weak. In New Zealand this is assisted by a relatively weak financial press, which has not provided a widespread critical analysis of company performance. Pressure has been somewhat greater in Australia, in part simply because share ownership is much more widespread. New Zealand has a very low market capitalisation given the level of development and income per head of the country. (One reason for this is that the extent of foreign ownership in New Zealand is higher than in any other OECD country and hence the scope for local quotation is more limited.) Australia also has a strong compulsory superannuation scheme, which means that shareholdings tend to be rather more concentrated and hence more able to have influence of the companies in which those shares are held.

28. However, trying to differentiate New Zealand in this regard is not particularly helpful with the banks being Australian owned and hence the main pressure (or lack of it) for prudence coming through Australian markets.

The Collapse of the Finance Company Sector

29. The collapse of the non-bank deposit taking sector in New Zealand, which started in May 2006, was almost complete by the time of the collapse of Lehman Brothers in September 2008.4 The New Zealand (and Australian) business cycle was in advance of that in the US by around 18 months. It is thus due largely to domestic economic conditions and to the realisation of domestic risks. Although there was some variety in the spread of finance companies lending business across consumer durables, cars, property and other finance, the ingredients of the collapse can be attributed to

greed and stupidity;

misaligned incentives;

governance failure and;

regulatory failure to use the words of Sheppard (2012).5

30. The sources of the failings are all too familiar. The institutions were not subject to prudential regulation as they were not thought, even jointly, to be of systemic importance as they covered less than 10% of total deposits. In so far as they were covered under the Securities Act of 1978, the Securities Commission had few powers to limit their actions, except through the power to compel them to withdraw the prospectuses they needed to raise/rollover funding. Aspects of good governance were not followed, although some of the worst offenders made strong claims to the contrary in their prospectuses.6

31. Finance companies were in the main owned by a limited number of individuals, who were also directors. While there were non-executive directors, the independence of many of them is debatable, and others were figureheads, associating well-known names with the company but not making any particularly extensive scrutiny of its affairs. Much of their funding came from fixed term deposits, which offered a margin over their bank equivalents. These appealed particularly to those in retirement or those saving for it—people whose appreciation of the risks involved would be likely to be limited. Some companies suffered from related party loans, to the extent in Bridgecorp that equity was negative. To cover the higher rates of interest finance companies had to take on higher interest paying and hence higher risk loans, with the need for larger margins increased by the salaries they paid themselves.

32. One of the most important failings of the light touch regime was the lack of a fit and proper person’s test for directors. This resulted in some people who had been involved in previous failures and poor governance being able to run up large losses for a further time. However, the sorts of test required are not simply that the potential directors should have an unsullied history and have demonstrated competence in running a company in the financial sector. For example, non-executive directors need to have the time, the inclination and the knowledge to have an impact. Strict liability provides a good but insufficient incentive. One of the difficulties is that “professional” directors with good reputations are likely to be “busy” and have several directorships, which reduces the chance of their being able to spend adequate time on the complex task of overseeing a bank.

Compounding the Problems with a Poorly Designed Deposit Insurance Scheme

33. The introduction of temporary deposit insurance in October 2008 revealed a further side to imprudent behaviour by directors and the drawbacks of poorly designed rapid regulatory intervention in a crisis. New Zealand felt obliged to introduce a temporary scheme immediately when Australia announced that it was going to introduce deposit insurance (up to $1 million per depositor per bank) to avoid there being any lack of confidence in the financial system. The New Zealand scheme, which was voluntary, had a number of serious drawbacks, one of which was that admission to the scheme required agreement after investigation, which took well over three months in some cases. If there had really been any lack of confidence in the financial system this would not have halted the incentive for a run on weak institutions. However, the aspect which is of relevance in the present context is that they offered insurance for all deposits, not just those that existed at the time. Hence weak institutions could then offer insured deposits at a higher rate of interest than the banks offered. As a result new money flowed into the troubled companies. Rather than taking the opportunity to strengthen their businesses, the reaction was to increase lending to try to provide new revenue streams that would compensate for the non-performing loans already on the books.

34. The introduction of deposit insurance thus resulted in a major moral hazard. It contributed to a considerable extra burden on the taxpayer. The largest of the remaining deposit taking finance companies, South Canterbury Finance, was able to increase its deposit base by nearly 50%. When the company failed in 2010 the expected loss to the taxpayer, after recoveries, was greater than if the authorities had simply paid out all the existing depositors in full in October 2008 and not bothered to try to reclaim any funds from the company. (In part this was because of further failure in the design of the insurance scheme in respect of payouts. Not only was continuing interest payable to depositors encouraging an early payout but it was not possible to make such payouts without guaranteeing all creditors.)

35. The particular case of South Canterbury Finance is still before the courts and hence it is not as yet clear whether the actions of the directors in rapidly expanding the balance sheet and exposing the depositors (or rather the Crown which would succeed to their claims in the event of a default) was illegal in any respect, even though it was clearly imprudent. The guarantee should have encouraged an orderly retrenchment. However, this response is common and is one of the reasons why, in the US, under FDICIA, if banks start getting into difficulty a whole set of restraints are placed on their actions to limit their ability to impose further losses on the deposit insurance fund, even though that is funded by the industry and not the taxpayer.

Professional Standards

36. Australia and New Zealand have jointly tried to develop professional standards in the finance industry voluntarily through Finsia (The Financial Services Institute of Australasia). This organisation offers courses, sets examinations and awards a series of titles for levels of experience and qualification. It also has journals, fosters links with the academic profession and seeks to lay on a continuing stream of events and advice that will keep its members well informed on the latest developments. This includes trying to encourage better regulation and governance and trying to increase financial literacy in the population at large.

37. While these developments are welcome and to be encouraged, there is no proper mechanism for ensuring the maintenance of good standards or the unfrocking of members for inappropriate actions. The recent requirements imposed by the authorities in New Zealand in requiring all financial advisors not simply to disclose their qualifications and degree of independence but to achieve one of two qualifications in order to be allowed to practice is clearly an important move to reduce some of the conflicts of interest and inappropriate motivation which existed in the past.

38. It is too early to judge whether these requirements, which have come into force over the last year, will make important differences for both the quality of advice and for the quality of decision-making by the clients who receive it. New Zealand has had its own small scandal related to miss-selling. This related to the sale of interest rate swaps to farmers towards the end of the period, in 2006, when interest rates had been rising. Purchasers were not properly informed of the costs they might bear if interest rates in the market actually fell. The advice provided by banks is covered by the act just in the same way as is that by independent advisors, so hopefully there will not be a repeat. At present it is not clear whether those selling the derivatives were simply ill-informed themselves about the implications of the product or whether they did not disclose all the aspects properly. Under strict liability the prime concern will be whether the disclosure was adequate, not over whether the banks knew about the downsides of their products. If the downside was not properly disclosed then the banks will be liable. Otherwise caveat emptor will apply.

The Accumulated Lessons

39. The experience in New Zealand over the last decade offers a number of straightforward lessons for professional standards and culture of the banking industry in the UK and for corporate governance, transparency, conflicts of interest and their implications for regulation and public policy. A selection is listed below.

(i)A lightly regulated sector is likely to lead to poor governance standards and poor risk management if the owners and directors can effectively protect themselves from the losses.

(ii)The extent of such poor governance and risk management was sufficient to lead to the virtual elimination of the deposit-taking finance company sector in New Zealand, mostly in the two years before the global financial crisis took hold

(iii)Strict liability and the successful prosecution of bank directors helps encourage better performance in the future but a period of successful growth and lack of prosecutions has led non-executive directors, in particular, to bear insufficient regard for what is occurring in their institutions and to place too much reliance on friends who were the executives.

(iv)The disclosure regime introduced in New Zealand in 1996 has been highly successful in the sense that the registered banks have been prudently managed and have not got into difficulty during the global financial crisis.

(v)The liability of directors, including the non-executives, for custodial sentences and for civil liability for losses may well have helped ensure a much closer attention to the business than is common in other companies.

(vi)New Zealand and more particularly Australia, where all the largest banks are headquartered, was not severely challenged by the global financial crisis nor was there any significant involvement with subprime lending or any of the derivatives that turned out to have “toxic” properties.

(vii)Margins on traditional business and hence profitability were good and hence there was no incentive to be imprudent. There is thus little that can be said about whether Australasian bankers would have succumbed in the same way as their northern hemisphere counterparts if they had been exposed to the same problems.

(viii)The New Zealand authorities are firmly of the opinion that an important contribution to prudent behaviour by banks is a credible system for resolving problem banks of any size—that involves shareholders bearing the first loss, followed by creditors in order of priority and directors expecting to lose their jobs and be financial responsible for their errors.

(ix)For such a scheme to work systemically important banks must be

(a)locally incorporated and capitalised,

(b)subject to intervention by the authorities at early stage when they no longer meet the conditions for registration,

(c)able to run themselves independently within the trading day,

(d)clearly enough structured that a summary assessment of the extent of the losses can be made within that day, and

(e)able to divide claims into frozen and unfrozen accounts within the trading day.

(x)Meeting these requirements implies very considerable prepositioning, not just in terms of bank structures and systems, but in having the skilled staff in both the banks and the regulator (resolution authority) who can perform the extremely rapid transformation should it be required

(xi)While most of these precepts are translatable to the UK context, it is not clear whether larger banks can be dealt with in this manner, however, good the preparation under living wills, or whether EU rules will permit sufficient independence from parent companies to be required.

(xii)Deposit insurance can offer serious moral hazards but a well structured explicit and compulsory scheme that is funded by the industry can avoid most of them

(xiii)Don’t wait till a crisis to try out the crisis measures.

40. New Zealand remains vulnerable to external shocks. A substantial proportion of the financing of the banking system comes from overseas. At present, with positive short run interest rates, well ahead of the near zero values in the US, Europe and Japan, there is no difficulty in raising such finance. But the exchange rate has risen by more than 30% with respect to the major currencies and hence a shock is possible, despite measures by the Reserve Bank to improve liquidity management and reduce foreign funding exposure in the banks. At that point one might see a rather clearer picture of the extent to which Australasian banks have managed to run an more prudent system and embrace a culture which is more responsible, less foolhardy and less aggressive than its northern hemisphere counterparts.

4 November 2012

1 BNZ Professor of Finance, Department of Accounting and Finance. I was Chief Manager in the Reserve Bank of New Zealand when the new regulatory regime for banks was introduced in 1996 but my responsibility at the time was for monetary policy not banking supervision. The views expressed here are purely personal.

2 Office of the Auditor-General, “The Treasury: Implementing and Managing the Crown Retail Deposit Guarantee Scheme”, Wellington, September 2011, available at:

3 The Reserve Bank has recently completed its impact assessment of the net benefit of OBR and concluded that despite noticeable costs for banks, these are small by comparison with the gains, which could exceed $1billion for a large bank.

4 46 companies collapsed before September 2008 and 11 afterwards leaving just 3 at the end of the period

5 Sheppard, B. (2012). Fundamental Problems with the Governance of the Financial Sector, ch.2 in D G Mayes and G E Wood, Improving the Governance of the Financial Sector, Abingdon: Routledge.

6 The specific case of Bridgecorp and the deposit taking finance company sector are set out clearly in Wilson, W., Rose, L. and Pinfold, F. Best Practice Corporate Governance? The Failure of Bridgecorp Finance Ltd., ch.4 in D G Mayes and G E Wood, Improving the Governance of the Financial Sector, Abingdon: Routledge.

Prepared 24th June 2013