Basel Committee issues corp gov guidelines

BASEL, SWITZERLAND – The Basel Committee on Banking Supervision has issued sound corporate governance guidelines for banking organisations. The guidelines, open for public comment until October 31, are to supersede similar principles it issued in 1999.

The document, Enhancing corporate governance in banking organisations, outlines eight corporate governance principles that boards of directors at banking organisations must pay attention to.

For the US, the principles represent best practices that are mostly already being examined for in the country's banks. "We will treat these as best practices in corporate governance, most of which are already covered in our evaluation of management supervision and board oversight in our banks," says Karen Kwilosz, director of op risk policy at the Office of the Comptroller of the Currency. "We will continue to be vigilant in our supervision of banks, and we expect other regulators in other countries will adopt these guidelines once they are finalised. The Working Group on Corporate Governance will meet again in November to address the comments that will be received."

The Basel Committee hopes the guidance will "promote the adoption of sound corporate governance practices by banking organisations in different countries". "Corporate governance from a banking perspective involves the manner in which institutions are governed by their boards of directors and senior management, which includes setting of corporate objectives, day-to-day running of the business and protection of depositors' interests," according to the Basel Committee Working Group on Corporate Governance in Banking Organisations.

The Basel Committee expects boards of directors to establish the strategic objectives and ethical standards that will direct the ongoing activities of the bank, taking into account the interests of stakeholders. The board must also ensure senior management implements policies to identify, prevent and appropriately disclose potential conflicts of interest that may arise from the various activities and activities of the bank.

It is the function of the boards to set and enforce clear lines of responsibility and accountability throughout the organisation. They should also ensure that compensation policies and practice are consistent with the bank's ethical values, objectives, strategy and control environment.

Mark Schmidt, Atlanta regional director for supervision at the Federal Deposit Insurance Corporation (FDIC), says all the principles are already covered in the safety and soundness examination of banks. OpRisk

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