Corporate Governance and Access to Finance - ESBG

nHowever, this does not mean denying the right of the government asan owner to set the bank’s overall objectives (paragraph 20, Principle1 of BCBS, 2006).Where a bank is state-owned, disclosure policy should include “anownership policy that defines the overall objectives of state ownership,the state’s role in the Corporate Governance of the bank, and how itwill implement its ownership policy” (paragraph 50, Principle 7 ofBCBS, 2006). It is important in this regard to stress the need for a cleardefinition of the mission and objectives of public banks.Amongst government-owned banks, postal savings institutions are animportant category of WSBI members, especially in Africa. A number ofthem are currently facing institutional reform with a view to turn theminto proficient and competitive financial institutions, acting as keyintermediaries for financial inclusion, across the country. A crucialcondition to reach this objective is the development of efficient andtransparent mechanisms, which will ensure full independence of themanagement and Board of Directors from political influence.The government's influence over the banking system is not confined toownership. As mentioned above, it has a significant influence throughregulation, and can also have an impact by adopting other controls orconditions, such as the establishment of mandatory ratios and/ or limits onoperations, either to their amount or the prices (e.g. interest rate ceilings).The influence of the state in the banking system is not only a question ofsound governance, but also one of efficiency. Thus, it is necessary toavoid any sort of undue influence that may cause a deterioration of theefficiency (and therefore the long term stability) of the financial system,such as (i) an unfair competitive advantage for public-owned banks,(ii) a bias in the financing towards the public sector, (iii) the provisionof liquidity to the public sector in privileged terms or (iv) the lack ofindependence of the board of directors and/ or the management ofpublic banks. In the particular case of Postal Banks, “it is crucial to put inplace efficient and transparent mechanisms which will ensure fullindependence of the management and Board of Directors of the postalsavings institution from political influence and clear supervision rules andresponsibilities” (WSBI, 2010).51