A recent paper from Goodhart and Lastra focuses on the danger posed by limited liability for bank management. They “advocate moving towards a two-tier equity system, primarily for banks, with insiders, senior managers and others with influence over corporate decisions, becoming subject to multiple liability” to address these dangers. As noted by Jonathan Ford in the Financial Times, “by making insiders financially accountable for their actions, it would rebalance the calculus of fear versus greed.” Clearly the lack of accountability for the financial crisis for nearly all bank managers is an issue that needs to be addressed. But are the banks ready to make this change or do they prefer (as managers) to be immune from the consequences of their actions.
