The bank directors have the mother of all the good excuses.

Sir Francesco Guerrera and Peter Thal Larsen wrote a full pager on June 26, 2008 titled “Gone by the Board?” on why the directors of big banks failed to spot the credit risk. Though it is not my intention or role to defend bank directors I must in all honesty say that they completely left out the most important argument the directors could use in their defence.

Just think about a knowledgeable and a responsible director’s chances to convince his fellow directors that the securities backed with subprime mortgages and rated prime by the credit rating agencies and appointed to such a task by the bank regulators themselves were not prime as he had heard rumours that the mortgages were not awarded with the same usual care. None? I would say so.

If you want a board to act you have to let it act and not let them believe that the credit rating agencies are doing the job for them.