Chapter

Fiduciary Obligation to Manage Risk

Alan N. Rechtschaffen

in Capital Markets, Derivatives and the Law

Published in print June 2014 | ISBN: 9780199971541
Published online May 2014 | e-ISBN: 9780199361458 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199971541.003.0015
Fiduciary Obligation to Manage Risk

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This chapter examines the fiduciary obligation of banks and financial institutions to manage risk, especially so as to avoid a financial crisis. It discusses the “Pushout Rule” of the Dodd-Frank Act. It explains directors’ and officers’ duty to manage risk and discusses the Bank for International Settlements’s (BIS) recommendations for the supervision of operational risk management practices by central banks. It also considers how directors can take specific steps to protect themselves and their firm from operational risks. The chapter concludes with an analysis of a case study involving JPMorgan Chase and its so-called London Whale trading of credit derivatives.

Keywords: financial crisis; Dodd-Frank Act; financial institutions; fiduciary obligation; banks; BIS; operational risks; risk management; credit derivatives

Chapter.  8593 words. 

Subjects: Company and Commercial Law

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