Is Insufficient Supervisory Board Competence a Risk Factor for Banks?

Key Messages

• The downfall of Credit Suisse should serve as a lesson that supervisory board competence determines the long-term risk of a bank. 
• The relationship between competent board supervision and bank performance has been confirmed for many countries since our much-cited study of German banks during the 2008/2009 financial crisis.
• However, our updated study shows that despite legislative efforts, board competence in Germany has improved only slightly. In particular, public banks are lagging behind.
• We recommend that bank supervisors systematically measure, track, and report bank board competence.