How supervisors can raise the bar for Boards and define the next era of resilient governance

5th January 2026 

Key takeaways

• Supervisors should embed behavioural intelligence into governance expectations, moving beyond skills and experience to systematically evaluate and challenge culture, judgement, and decision-making dynamics.
• Board capability assessments must become continuous and forward-looking, with explicit expectations for upskilling, renewal, and scenario-based training aligned to emerging risk themes.
• External and independent evaluations should become a routine supervisory expectation, serving as catalysts for self-reflection and sources of objective insight into Board performance.
• Supervisors should proactively guide institutions on responsible use of AI in governance, ensuring these tools enhance — not diminish — critical thinking, challenge, and accountability.
• The regulatory framework for Board effectiveness already largely exists. The supervisory opportunity now lies in applying judgement to assess behaviours, decision-making dynamics, and future-readiness — not in adding new rules.

1. Governance in the Age of Disruption 

Financial institutions today operate in a global environment characterised by overlapping disruptions. Geopolitical tensions, rapid technological evolution, climate-driven shocks, and economic volatility have collectively created what many leaders describe as a state of “permacrisis.” In this environment, the resilience of financial institutions increasingly hinges on the effectiveness of their Boards: their ability to anticipate emerging risks, challenge management constructively, and make decisions under uncertainty. Ineffective Boards lay at the heart of failures, with Credit Suisse’s Board demonstrating cultural unwillingness to engage in challenging discussions,¹ and Silicon Valley Bank’s Board demonstrating lack of judgement to prioritise risk governance.

Oliver Wyman’s 2025 CEO survey shows that 68% of CEOs of Financial Services firms consider that there has been an increase in Board involvement in strategy and governance, and 45% see an increase in Boards providing specialized expertise (for example, audit and finance, cybersecurity, AI, geopolitics).² More Boards are proactively including director skill matrices in shareholder materials, reaching 73% in 2024 versus 38% in 2020 for S&P 500 companies.

Today’s environment tests not only Boards but also the supervisory models designed to oversee them. Regulatory and supervisory expectations have been traditionally rooted in traditional notions of expertise and compliance, while behavioural effectiveness, adaptive learning, and technology-enabled governance have not been fully embedded in supervision. Supervisors have taken note of the changing demands. From Australia to Europe, supervisors are progressively strengthening governance expectations: clearer standards on skills and experience, more rigorous fit and proper assessments, and a growing recognition that behaviours and culture shape Board outcomes as much as technical expertise.

This contribution proposes a forward-looking supervisory agenda designed to elevate Board effectiveness. Its goal is not to add layers of regulation, but to sharpen supervisory focus, improve practices, and ensure that governance keeps pace with the complexity of financial markets. It acknowledges that today’s context is different from past cycles due to the compressed reaction times, increased interconnectedness of risks, and the need for new skillsets as business models and risks evolve in response to technological advances and customer behaviours.

2. The Regulatory Direction of Travel

The regulatory architecture for Board effectiveness is largely in place. Across jurisdictions, supervisory expectations for effective governance have steadily converged (although the depth and focus of supervisory approaches still vary materially across jurisdictions). Most regulatory regimes now encompass four core elements:

1. Fitness and probity assessments: Annual or event-based assessments, covering integrity, competence, and ongoing suitability, are widely embedded across Europe, the UK, Australia, and other jurisdictions.
2. Clarity on Board skills and experience: Regulators increasingly require documented competency frameworks, skills matrices, and evidence of periodic review. APRA, RBNZ, the FMA, CBI, and DNB have all articulated expectations that Boards demonstrate the right mix of financial, risk, technology, and strategic oversight capabilities.
3. Behavioural considerations: Guidelines from the EBA, ESMA, CBI, and DNB explicitly incorporate behavioural markers into expectations: openness to challenge, capacity for constructive debate, sound judgement, teamwork, and ethical conduct.
4. External evaluations: While mandated in some markets and encouraged in others, independent Board evaluations are increasingly viewed as a foundational component of good practice.

Together, these elements represent a mature and robust framework. What is missing is not a new set of regulatory requirements — but a more proactive, judgement-based approach to applying the existing ones. Excessive codification can turn expectations into mechanical, compliance-driven exercises. Institutions begin to focus on producing documentation rather than improving practice; Board reviews become predictable and superficial; skills matrices turn into static templates instead of dynamic tools. Avoiding this outcome is central to ensuring that governance standards achieve their intended purpose: strengthening oversight, enhancing resilience, and enabling strategic leadership.

3. Proposed Supervisory Agenda for Board Effectiveness

Despite the maturity of the existing regulatory framework, Boards continue to fall short in areas that rules alone cannot fix. Supervisors can elevate how they apply the current framework, with sharper insight into behaviours, more forward-looking expectations on capability, and a more active stance on the tools and technologies shaping Board decision-making. The agenda that follows outlines practical steps supervisors can take to raise standards:

• Assessing how boards behave, not just who sits on them: Behavioural dynamics are consistently identified as the root cause of governance failures. Groupthink, deference to authority, information asymmetries, and misplaced confidence have contributed to failures. Supervisors need not create new behavioural regulations, instead they can articulate a clear set of behavioural competencies that build on existing fit and proper frameworks (e.g. constructive challenge, sound judgement under uncertainty, collaboration and transparency, integrity and ethical reasoning), acknowledging the role of the Chair as a magnifier of constructive behaviours. These expectations should be incorporated into suitability assessments, thematic reviews, and supervisory dialogues. Supervisory teams should receive training in behavioural assessment techniques, enabling them to interpret dynamics and identify behavioural risks during interviews and on-site reviews – this is an area where DNB, the Bank of England, and other authorities have pioneered practical methodologies. For instance, the BoE resorts to former practitioners (labelled “grey panthers”) to support in interviews to candidates. These methods are rooted in principles, not checklists, allowing for flexibility across entities.
• Encouraging continuous, forward-looking capability renewal: The pace of change means static skill assessments rapidly lose relevance. A Board that is “fit and proper” today may not be equipped for tomorrow’s risks, which range from AI and cyber threats to climate scenario modelling or geopolitical fragmentation. To ensure skillsets evolve at the pace of risk, supervisors can encourage institutions to refresh skills matrices with a forward-looking view not solely as backward-looking inventory, adopt immersive learning approaches, including crisis simulations, tabletop exercises, and scenario-based workshops, and evaluate learning agility, curiosity, and adaptability as part of ongoing Board assessments. Supervisors can emphasise the importance of appointing directors with demonstrated adaptability, curiosity, and openness to feedback – attributes that will prove essential as risk profiles evolve.
• Normalising External Assessments as a Tool for Supervisory Insight: External assessments bring independence, objectivity, and behavioural insight that internal reviews struggle to achieve. Supervisors increasingly rely on these evaluations to inform judgement, particularly where concerns arise about challenge culture or Board-management dynamics. Supervisory authorities can strengthen governance by clarifying expectations for the scope of external evaluations (behaviours, information quality, decision-making processes, and Chair effectiveness), encouraging institutions to undertake these reviews periodically, and using external evaluation results in supervisory dialogues, helping institutions translate findings into concrete development pathways. Importantly, external reviews should not become a surrogate for supervisory responsibility. They should augment supervisory judgement, not replace it, and they should be deployed in a way that encourages authentic self-reflection rather than performative compliance.
• Providing Guidance on the Responsible Use of AI in Governance: AI is rapidly reshaping the governance landscape. Tools that summarise Board papers, generate insights, or assist in minute-taking can enhance efficiency, but they also introduce new behavioural, operational, and ethical risks. Supervisors should encourage firms to reflect on the acceptable boundaries of AI use in governance processes and the importance of maintaining human judgement, particularly in reviewing Board materials and assessing risk narratives. AI’s role should be an assistive, not substitutive, tool, and there should be full transparency around AI use in Board processes. Supervisors should clearly underline risks to psychological safety, as overly comprehensive transcript-based AI tools may inhibit full and frank discussion. Supervisors can articulate expectations through dialogue, thematic reviews, and supervisory letters — allowing approaches to evolve alongside the technology.
• Strengthening the Supervisory-Industry-Academic ecosystem: Enhancing governance oversight is not solely a regulatory task. Progress depends on a more interconnected ecosystem where supervisors, institutions, and academic researchers collaborate to deepen the understanding of Board effectiveness. Supervisors can play a convening role by facilitating industry dialogues on emerging governance risks and behavioural insights, and by encouraging cross-institution learning exchanges, particularly on crisis preparedness and scenario planning. 

4. Conclusion: Using Supervisory Judgement to Unlock Board Effectiveness

The supervision of governance is entering a new phase. The complexity of today’s financial system demands Boards that are adaptive, behaviourally intelligent, and strategically engaged. The priority for regulators is to use existing frameworks more intelligently, more proactively, and with greater focus on behaviours and outcomes.

This requires supervisory teams to exercise judgement and engage Boards in deeper strategic conversation. It requires avoiding checklists and resisting the gravitational pull of overly prescriptive assessment models. And it requires reviewing internal operating model (e.g. how to approach interviews, upskilling supervisory teams, etc.)

Institutions that embrace this approach, viewing supervisory expectations not as compliance obligations but as catalysts for self-improvement, will be better positioned to navigate disruption, manage risk, and create sustained value. 

Endnotes: 

1. Swiss Financial Market Supervisory Authority (FINMA), “Archegos: FINMA concludes proceedings against Credit Suisse.” July 24, 2023.

2. Oliver Wyman Forum European CEO survey 2025 (May to July).

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