Basel Committee: Principles for Enhancing Corporate Governance

By Mutual Fund Directors Forum, May 6, 2010

In March, the Basel Committee on Banking Supervision issued a consultation draft of its paper, Guidance for Enhancing Corporate Governance.  Aimed at providing best practice guidance both to individual banking and finance organizations, and to the global financial system, this document is intended to “assists banking supervisors and provides a reference point for promoting the adoption of sound corporate governance practices by banking organisations in their countries.”  The Basel Committee’s principles focus on fundamental deficiencies in bank corporate governance indicated during the recent financial crisis. The principles cover:

  • the role of the board, which includes approving and overseeing the implementation of the bank’s risk strategy taking account of the bank’s long-term financial interests and safety;
  • the board’s qualifications. For example, the board should have adequate knowledge and experience relevant to each of the material financial activities the bank intends to pursue to enable effective governance and oversight of the bank;
  • the importance of an independent risk management function, including a chief risk officer or equivalent with sufficient authority, stature, independence, resources and access to the board (...continue reading)
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