A bank’s reputation is built over decades and can unravel in weeks once a governance failure comes to light. Time and again, the same underlying pattern repeats itself, weak internal controls, inadequate board oversight, misaligned incentives, and a culture where warning signs were ignored or actively suppressed. The ten cases below span Indian and global banking history and remain widely studied because each one exposes a different dimension of how governance can fail, and what it costs when it does.
1. Punjab National Bank and the Nirav Modi Fraud
Between 2011 and 2018, PNB officials at its Brady House branch in Mumbai issued fraudulent Letters of Undertaking worth roughly 14,000 crore rupees to companies linked to diamond merchant Nirav Modi and his uncle Mehul Choksi, without collateral and without recording the transactions in the bank’s core banking system. The fraud went undetected for years because PNB’s core banking system was never linked to the SWIFT messaging platform, a gap flagged by an RBI circular in 2016 that the bank did not act on. The scandal led to the removal of senior executives, a sharp fall in PNB’s share price, and a government letter to the RBI describing the episode as a manifestation of supervisory failure.
2. Yes Bank’s Governance and Asset Quality Collapse
Yes Bank’s near collapse in 2020 stemmed from years of aggressive lending to stressed corporate groups, understated bad loans, and a founder led governance structure that gave limited room for independent challenge. The RBI eventually had to impose a moratorium and engineer a rescue led by State Bank of India and other lenders, wiping out significant shareholder value and shaking confidence in the broader private banking sector.
3. IL&FS and the Shadow Banking Crisis
Infrastructure Leasing and Financial Services defaulted on its debt obligations in 2018 despite carrying high credit ratings just before the collapse, exposing serious governance and disclosure failures within a complex group structure. The fallout triggered a liquidity crisis across India’s NBFC sector and prompted the government to supersede IL&FS’s board entirely, one of the clearest examples of how governance failure in one institution can destabilise an entire segment of the financial system.
4. Wells Fargo’s Fake Accounts Scandal
Wells Fargo employees opened millions of unauthorised deposit and credit card accounts for customers between roughly 2011 and 2016, driven by aggressive cross selling sales targets that senior management failed to rein in despite years of internal complaints. The scandal resulted in billions of dollars in fines and settlements, the departure of the CEO, and years of regulatory restrictions, including an asset growth cap imposed by the Federal Reserve that remained in place for years afterward.
5. Lehman Brothers and Repo 105
Lehman Brothers used an accounting technique known as Repo 105 to temporarily move billions of dollars of assets off its balance sheet just before reporting periods, making its leverage appear lower than it actually was. The board and auditors failed to challenge this practice adequately, and when the 2008 financial crisis hit, Lehman’s actual leverage and fragility were exposed, leading to the largest bankruptcy filing in US history and a systemic shock that helped trigger the global financial crisis.
6. Barings Bank and Nick Leeson
Barings, one of Britain’s oldest merchant banks, collapsed in 1995 after a single trader, Nick Leeson, accumulated over 800 million pounds in unauthorised derivatives losses in Singapore. The core governance failure was structural, Leeson controlled both the trading desk and the settlements function that was supposed to check his trades, a basic segregation of duties failure that went uncorrected for years despite warning signs. The bank was sold for a symbolic one pound shortly after.
7. Danske Bank’s Estonian Money Laundering Scandal
Danske Bank’s small Estonian branch processed roughly 200 billion euros in suspicious transactions between 2007 and 2015, flowing largely from Russia and other former Soviet states. Internal whistleblower warnings were raised years before the scale of the problem became public, and investigations later found that group level oversight of the branch’s anti money laundering controls had been inadequate for an extended period. The scandal triggered investigations across multiple countries and a significant loss of market value and reputation for the bank.
8. HBOS and the Reading Fraud
HBOS, formed from the merger of Halifax and Bank of Scotland, suffered from a lending culture at its Reading branch where corrupt bank officials colluded with external consultants to defraud small business customers, some of whom lost their livelihoods, over several years in the mid 2000s. A subsequent independent review found that senior management had been aware of concerns raised internally well before the fraud was finally investigated and prosecuted, and HBOS itself required a taxpayer funded rescue during the 2008 financial crisis.
9. Silicon Valley Bank’s Risk Management Gaps
Silicon Valley Bank collapsed in March 2023 after a rapid deposit run, but the underlying governance failure had built up over the prior two years, a board and risk committee that did not adequately challenge management on interest rate risk concentration, a long vacancy in the chief risk officer role during a period of rapid balance sheet growth, and asset liability management practices that left the bank dangerously exposed once interest rates rose sharply. Subsequent regulatory reviews pointed directly to board and senior management oversight failures as a core cause.
10. Credit Suisse’s Years of Risk and Compliance Failures
Credit Suisse’s eventual collapse and emergency acquisition by UBS in 2023 followed years of accumulated governance failures, including the Archegos Capital hedge fund default that cost the bank billions due to inadequate counterparty risk controls, the Greensill Capital supply chain finance collapse, and a series of compliance and risk management lapses documented in independent board reviews. Each incident on its own might have been survivable, but the pattern of repeated governance breakdowns steadily eroded market and regulator confidence until a crisis of confidence made the bank unviable as a standalone institution.
The Common Threads
Across all ten cases, a small number of governance failures repeat consistently. Core systems were not properly integrated or monitored, as seen at PNB. Sales or growth incentives were allowed to override control functions, as at Wells Fargo. Segregation of duties was absent or ignored, as at Barings. Internal warnings were raised but not escalated effectively to the board, as at HBOS and Danske Bank. And in several cases, the board itself lacked the independent challenge capacity or risk expertise needed to ask the right questions before a crisis became public.
Conclusion
These ten cases show that governance failure is rarely a single dramatic event, it is usually the slow accumulation of ignored warnings, weak controls, and boards that did not ask hard enough questions in time. Building genuine oversight capability before a crisis is far cheaper than rebuilding trust after one.
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