Basel Committee Issues Consultative Document on Corporate Governance of Banks

The Basel Committee on Banking Supervision has issued a revised guidance to help promote the adoption of sound corporate governance practices by banking organisations and has called for comments on the document. Entitled Enhancing Corporate Governance for Banking Organisations, it builds on guidance published by the Committee in 1999. Mr Jaime Caruana, chairman of the Basel Committee and governor of the Bank of Spain, said: “Effective corporate governance is essential to maintaining public trust and confidence in the banking sector, and provides a crucial anchor for sound risk management practices.” The paper highlights the importance of effective management of conflicts of interest; the role of boards of directors (with greater emphasis on the role of independent directors) and senior management; the role of internal and external auditors and other control functions; governing in a transparent manner; and the role of supervisors in promoting sound corporate governance. In addition, the paper presents some considerations for corporate governance related to the activities of banking organisations that are conducted through structures that may lack transparency, or in jurisdictions that pose impediments to information flows.


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