The view that the independent directors of large banks should contribute to safeguarding the interests of bank creditors and taxpayers, by exercising a stringent risk oversight of bank executives, has gained ground in the aftermath of the 2007–2009 crisis. Using a cross-country sample of large banks for the period 2004–2014, we show that post 2009 an increase in board independence leads to more prudent bank risk-taking compared to the rest of the sample period. This effect materializes via independent boards favoring increases in bank capitalization and decreases in bank portfolio risk after the global crisis. Additional analyses demonstrate, however, that these results do not hold for all large banks in our sample but are confined to the group of banks benefiting from a government bailout during the crisis. In most large international banks board independence does not contribute to safeguarding the interests of bank creditors and taxpayers by constraining bank risk-taking.

In a cross-country setting we show the probability of a forced CEO turnover in large banks is positively associated with idiosyncratic tail risk. This finding is strengthened the greater the competition in the banking industry and when stakeholders have more to lose in the case of distress. Overall, the exposure to idiosyncratic tail risk offers valuable signals to bank boards on the quality of the choices made by CEOs. In contrast, systematic tail risk becomes important for forced CEO turnovers only in the presence of a major variation in the costs this risk generates for shareholders and the organization.