Corporate Governance and Access to Finance - ESBG

The fact that the banking system is a heavily regulated industry hasimportant implications for Corporate Governance. Adequate control ofrisks is a necessity from both the regulatory and the CorporateGovernance point of view. In many countries, banking regulatorshave encouraged the adoption of codes of Corporate Governanceencompassing prudent risk management practices. And in manyemerging and developing countries, the authorities (central banks,banking supervisors), aware of the essential contribution of financialdeepening to the development of the country, have also stimulatedpolicies to foster financial deepening.WSBI members are active part of both strategies: the tendency towardsbetter Corporate Governance practices, through the adoption ofinternational and domestic standards, and – especially in emerging anddeveloping countries – the progress towards financial inclusion.Regulation is a driver of both policies. Although the link betweenCorporate Governance and financial inclusion (from the point of view ofthe regulator) could be weak in some countries, WSBI members, ascatalysers of both lines of action, ensure their connection. All in all,financial regulation – and more broadly public sector policies – couldestablish an additional link between Corporate Governance and Accessto Finance for WSBI members.An interesting example of this connection is the role played by COFIDE inthe recapitalisation of Peruvian CMACs. As they rely only on retainedprofits for their re-capitalisation, CMACs face a challenge – common tomany other savings banks – of insufficient instruments for a pro-activerecapitalisation policy in case of need. COFIDE provides subordinateddebt to CMACs on the condition that they retain as reserves a share oftheir profits above the legal minimum (at least 75 percent instead ofthe 50 percent legal minimum), thus providing a double mechanism tostrengthen the capital base. This recapitalisation allows the PeruvianCajas to pursue their financial inclusion policies that otherwise would becurtailed by insufficient resources.38