By Patricia Kowsmann in Frankfurt and Jeannette Neumann in Madrid 

Corporate governance shortcomings are common in Europe's banks, experts say.

For example, when two Italian banks decided to merge last year, the lenders wanted to cut the newly combined board to 24 members from 47. After a monthslong battle between the European Central Bank and the two lenders, the ECB forced the banks to cut the total number of directors down to 19.

Peter Nathanial, co-director of a program on banking governance at Europe's INSEAD business school, said while there is no rule, boards should typically have between eight and 15 directors, depending on the complexity of the business.

At unlisted Italian lenders Banca Popolare di Vicenza SpA and Veneto Banca SpA, which had been liquidated by the government on June 25, boards of both banks had assigned prices to their shares that analysts and other bankers considered generous.

While the practice was legal, analysts said the assigned share prices were unrealistic. Executives and board members at the banks had previously said shareholders had signed off on the assigned prices.

And in Germany, state lender HSH Nordbank is looking to find a buyer or could face liquidation after suffering massive losses on souring shipping loans.

Those loans were given out for years under the supervision of politicians and shipping magnates who sat on the bank's supervisory board and encouraged it to become the world's biggest shipping lender.

Experts say the setup created a conflict of interest and exposed the lender to too much risk in one sector.

A HSH Nordbank spokesman declined to comment.

Write to Patricia Kowsmann at patricia.kowsmann@wsj.com and Jeannette Neumann at jeannette.neumann@wsj.com

(END) Dow Jones Newswires

July 24, 2017 05:45 ET (09:45 GMT)

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