The Liability of Directors and Officers in The Banking Sector: In View of The Capinordic Case

Jeppe Mohr Gunge Fromm

Student thesis: Master thesis

Abstract

During the recent financial crisis several banks went bankrupt which caused a serious threat to the financial stability in society as a whole. In the aftermath focus has been on who ́s to blame and what should be done to prevent similar breakdowns from happening in the future. These thoughts among other factors, has resulted in a series of liability claims raised by the government banking liquidation institution, Finansiel Stabilitet, against former directors and officers in the bankrupt banks.
This thesis will take its starting point in the recent decided case of Capinordic Bank, which is the first in the line of banking director liability cases that is to be decided in the following years. This particular case is therefore expected to set the standards of liability for directors and managers negligent behaviour in the banking industry. A standard expected to be used in the following cases. The thesis will question to what degree managers and directors in the banking industry are subject to a stricter duty of care than those serving ordinary companies given the results in the Capinordic- judgment.
The Capinordic-judgment reflects an aggravated use of the business judgment rule, which can be seen as a stricter duty of care compared to earlier case law and the description of the rule in legal literature. In the results of the economic theory concerning the business judgment rule this could reflect an effort to reduce systemic risks across the banking industry. To the extent that judges are capable of identifying systemic risks, and incorporate those in the standard of liability, the tort system can be seen as an efficient method of internalizing the externalities brought to society, as a result of excessive systemic risk taking from bank directors and officers.
The thesis will be forward looking and try to combine the legal results of the Capinordic-judgment with the relevant economic theory to come up with guidelines on how the tort system can be used as an efficient remedy in the directors and officers liability cases that follows.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2016
Number of pages90
SupervisorsHenrik Lando