Research and Markets: Corporate Governance in Banking: Have Banks Grasped the Full Meaning of Governance in Financial Institutions?

Business Editors

DUBLIN, Ireland--(BUSINESS WIRE)--May 12, 2004

Research and Markets (http://www.researchandmarkets.com) has announced the addition of Corporate Governance in Banking to their offering.

High profile financial failures like Enron and WorldCom have undermined trust in the corporate sector and sent shockwaves through stock markets all over the world. Our new report will take a detailed look at the governance of banks and provide an insight into the array of issues, which have to be taken into account if they are to achieve best practice.

Trust in the financial system has never been lower and confidence has been eroded in the veracity of earnings statements and audited accounts. Today the way in which companies are managed and controlled is under the most intense scrutiny and the subject of corporate governance has shot to the top of the agenda. In future, companies in all sectors can expect a new public and investor skepticism about their standards of disclosure and the structure of their decision-making processes.

The balance of power is changing in the corporate world and now boardrooms will be forced to pay greater attention to their relationship with stakeholders and the transparency and probity of their financial statements. Legislators and regulators have already moved to tighten the parameters within which corporations operate.

The audit process is being thoroughly reviewed and the duties and obligations of directors are under the most intense spotlight. The formulation of director compensation is being monitored and often attacked in a way not seen before and the role of the independent non-executive seems certain to undergo radical transformation. The focus on corporate governance is particularly acute in financial services and, most of all, in the banking sector.

The banking sector is already highly sensitised to public scrutiny and has learned to its cost the risk of attracting adverse publicity through failings in governance and stakeholder relationships. Banking is clearly a very special sub-set of corporate governance with much of its management obligations enshrined in law or regulatory codes.

How are banks around the world responding to the call for higher standards of corporate governance and have they grasped the full meaning of governance in a financial institution? Rating agencies are now publishing metrics for corporate governance but are the banks aware of the detailed questioning that lie behind these scores? The report will alert banks to the issues that now matter to investors and other stakeholders when governance is under review.

The report will also show how overall governance relates to internal control and audit, how board committees can scrutinise and question complex financial and strategic matters taking place in their banks and how board structure must respond to the pressures now being applied to executive and non-executive directors. How are banks responding to these codes in the different jurisdictions and what are the issues they are failing to address? This section will also provide alerts to the direction in which governance is moving and the likely shape of the new codes, and possibly legislation, which is to be expected (i.e. codes on director's pay, cross-holdings, non-executive interests, corporate social responsibility etc). This will be related to the specific factors, which impact the banking sector including Basel.

Why Banking Is A Special Case? - This section will examine the complex network of interactions between general board-level governance issues and the operations of the rest of the bank.

This will embrace issues including the relationship between internal and external audit, audit and the banking regulator, capital adequacy and the use of financing tools which help promote good governance, board level understanding of risk measurement, oversight of internal control and the compliance function, ethical selling and governance issues in the management of retail investment funds.

As holders of equity and debt issues in companies banks are also actively involved in promoting corporate governance in other companies - how should they develop this function and does it have implications for their own governance?

Case Studies - Case studies of banks throughout the world will show how some have been responding for the need for higher standards of governance.

Case Studies

The Asian banking crisis

Governance failings

Lessons learned

Abbey National

Abbey National and market control

Allied Irish Banks 

Allfirst

AIB's governance response

BCCI 

Governance breaches

Supervisory issues

The role of the auditors

Supervisory issues

The role of the auditors

Citigroup

Citigroup and Enron

Citigroup's governance reforms

Credit Lyonnais

Lessons learned

Banco Popular

Banco Popular's governance principles

Committees

Boardroom standards

Bank One

Bank One's business model

Corporate governance principles

BNP Paribas 

Deutsche Bank 

Deutsche Bank's governance code

Deutsche Bank sets the standard

HSBC 

HSBC's governance strategy

Westpac

For more information visit http://www.researchandmarkets.com/reports/c1945