Banks have added more nonexecutive directors with financial experience since the financial meltdown, but industry experience on banks' boards is still weak, Moody's Investors Service said Tuesday.
The ratings service said 46% of nonexecutive directors now have financial backgrounds, up from 32% before the crisis began, according to a recent survey of 20 large global banks.
"There has been a flurry of changes to many bank boards since the beginning of the financial crisis, particularly at banks where governments have or had taken ownership stakes or provided extraordinary support," said Moody's analyst Christian Plath. "Since July 2007, there has roughly been a one-third turnover of members at many big U.S. and European banks."
Plath said that the crisis prompted companies to question whether their directors had relevant experience and could ask the right questions. But Moody's said that industry experience among outside directors "remains weak, or is just absent at some banks" and that, in general, bank boards are too large, which can hamper their effectiveness.
