Basel Committee issues revised corporate governance principles for banks

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08 Jul, 2015

The Basel Committee (“the Committee”) has today issued revised principles on corporate governance for banks (“the revised principles”). The revised principles build on the Committee's 'Principles for enhancing corporate governance', published in 2010.

Effective corporate governance is critical to the proper functioning of a bank, the banking sector and the economy.  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”. 

The revised principles, which have been developed after a consultation in October 2014:

  • 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 of individual board members to dedicate sufficient time to their mandates and to keep abreast of developments in banking;
  • 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), as well as underline the importance of a sound risk culture to drive risk management within a bank;
  • 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.

The press release and revised principles are available from the website of the Bank for International Settlements.

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