Corporate Governance for Banks in Southeast Europe: Policy - IFC

ankers’ associations, and other institutions. Since institutes of directors are themselves in various stages of
development in the region, there may be some role for governments to encourage and promote such training
efforts. And it is important not to overlook the responsibility of the chair in strengthening the human capital
of the board; without the proactive leadership of a chairperson, it is unlikely that board members will seek
out further training opportunities themselves. (See Section III.A.5, below, on the role of the chairperson.).
Recommendations:
Training: Training for board members: Training opportunities need to be enhanced. All banks should
develop a plan for induction training and make such training mandatory. This training should orient new and
existing board members on bank processes, forms, reports, organization, and so on—the internal workings
and reporting processes of the bank. The board should be attentive to ongoing and postinduction training
opportunities provided by institutes of directors, governments, international financial institutions, academia,
and others.
Role of the chairperson in board development: The chairperson of the board should ensure that new
board members receive a full, formal, and tailored induction upon joining the board. The chairperson should
also regularly review and reach agreement with each board member regarding individual training and
development needs. (See recommendations on the role of the chair in Section III.A.5, below.)
Role of board members in their own development: Board members should recognize that learning is
a way of creating long-term value both for themselves and for the bank. Though banks may stop short of
creating mandatory training requirements, they may issue strong encouragement for board members to
engage in learning activities when good opportunities present themselves.
A4. Composition 21
Defining the needed profile
The composition of the board fundamentally
determines its effectiveness. Effective boards have
diversity, different backgrounds, and a multiplicity of
skills and opinions. By contrast, overly homogeneous
boards can breed narrow thinking or “groupthink” and
can pose a serious governance risk.
Diverse skills and backgrounds need to be
complemented by personal qualities such as integrity.
Board-member integrity can be established through
probity or “fit and proper” tests as conducted by
the FSA (Financial Services Authority) in the United
Kingdom. 22 Some countries, such as Bulgaria, conduct
such tests and require preapproval by the supervisor of
board members or executives.
21 2010 BIS Principles, Section III.A, p. 10.
22 FSA, “The Fit and Proper Test for Approved Persons” (January 2004).
http://www.fsa.gov.uk/pubs/hb-releases/rel27/rel27fit.pdf.
The Importance of Character and Competence
“It is the people, not the bodies, who run
the shop. My focus would be on board
composition. I would really underline the
individual characters of people.
People have different kinds of appetite
for risk according to their gender, age,
culture, background, and so on. These are
the kinds of issues that you might want to
consider when building up a board.”
Olli Virtanen, Finland
“When we focus on the qualifications of
the directors, the ‘fit and proper’ rules,
we should not just look at the negative
criteria — that they should not have a
criminal record, they should not have done
this, that or other things. We should really
look at what the director is there for.”
Gian Piero Cigna, Italy
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Policy Brief
Corporate Governance for Banks in Southeast Europe