The following thesis examines the financial risks faced by bank board members. It primarily analyzes bank board members' corporate legal duties and the civil liability attached to breaches thereof. Subsequently, the thesis highlights the main practical issues related to the enforcement of bank board members' civil liability – boardroom culture, information asymmetry, lack of expertise, duration and costs of litigation, and lack of available members' personal funds to repay the damages. In response to the inefficiencies of civil liability enforcement, the thesis analyzes specific alternative corporate governance mechanisms, namely compensation schemes and D&O insurance. Bankers' remuneration systems, if structured appropriately, may provide a source of financial risk faced by boards and may therefore motivate the members to execute their professional duties prudently, ensuring long-term bank stability. In this respect, remuneration systems containing debt-related and hybrid instruments bear great potential, while equity-based instruments lack efficiency due to the moral hazard they cause. Additionally, D&O insurance is examined, as it presents an adequate source of incentives, providing legal and economic assistance to bank boards in case of civil liability enforcement. D&O insurance reduces the financial risks faced by board members, hereby allowing for efficient board recruitment, member retention, and confident decision-making with minimal fear of civil lawsuits. Due to the numerous benefits attached thereto, the thesis promotes the obligatory establishment of Slovenian bank boards' D&O insurance. Moreover, as the insurance premium acts as a proxy of banks' corporate governance quality, the public disclosure of premium size should be mandated as obligatory in Slovenian banking law.
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