ABSTRACT
A new legal provision is proposed which would effectively implement the new corporate objective and ensure that financial institution directors and senior managers face powerful financial incentives to refrain from taking decisions that increase the insolvency risk of their institution. The government recently rejected the idea of introducing 'a new primary duty on bank directors to promote the financial stability of their companies over the interests of shareholders'. Relying on soft-law recommendations such as the UK Corporate Governance Code would be inadequate due to the lack of enforcement mechanisms other than market discipline. The scope of the civil liability provision ought to be tailored in a manner that effectively safeguards the stability of the UK financial system. With regard to the nature of liability, it is necessary to strike a balance between, on the one hand, the effectiveness of the provision, and, on the other, the need to avoid excessive deterrence.
