Corporate governance principles for banks.
The Basel Committee's revised principles on corporate governance at banks build on the Committee's 2010 document Principles for enhancing corporate governance. Specifically, the revised principles:
- strengthen the guidance on risk governance, including the risk management roles played by business units, risk management teams, and internal audit and control functions (the three lines of defence) and the importance of a sound risk culture to drive risk management within a bank;
- expand the guidance on the role of the board of directors in overseeing the implementation of effective risk management systems;
- emphasise the importance of the board's collective competence as well as the obligation on individual board members to dedicate sufficient time to their mandates and to remain current on developments in banking;
- provide guidance for bank supervisors in evaluating the processes used by banks to select board members and senior management; and
- recognise that compensation systems form a key component of the governance and incentive structure through which the board and senior management of a bank convey acceptable risk-taking behaviour and reinforce the bank's operating and risk culture.
Effective corporate governance is critical to the proper functioning of the banking sector and the economy as a whole. While there is no single approach to good corporate governance, the Committee's revised principles provide a framework within which banks and supervisors should operate to achieve robust and transparent risk management and decision-making and, in doing so, promote public confidence and uphold the safety and soundness of the banking system.
- Publication Date: October 2014
- Publication Type: Consultative
- Publication Status: Closed
- Publication Category: Governance
- Number of Pages: 36
- Keywords: Independent Directors, Three Lines Of Defence, Board Structure, Audit, Risk Committee, Governance, Compliance, Compensation, Audit Committee, Remuneration
For definitive information on regulatory matters always consult primary sources, especially where it concerns legally binding rules and regulations.
The above regulatory document abstract is quoted verbatim in this Open Risk Manual entry and provided free of charge for the convenience of all internet users. There is no explicit or implicit endorsement of this web service by the Bank of International Settlements. The copyright of the included material rests with the original authors (Links to the original texts are duly provided).