Corporate Governance and Access to Finance - ESBG

Specifically they focused on the interests of depositors as well as those ofshareholders, asserting that “given the important financial intermediationrole of banks in an economy, the public and the market have a highdegree of sensitivity to any difficulties potentially arising from anycorporate governance shortcomings in banks. Corporate governance isthus of great relevance both to individual banking organisations andto the international financial system as a whole, and merits targetedsupervisory guidance”. More specifically, the report recommends thatbanking supervisors provide guidance for bank Corporate Governancebest practices and determine whether those have been implemented.According to Jaime Caruana, the then Chairman of the BCBS and nowManaging Director of the BIS, “effective Corporate Governance is essentialto maintaining public trust and confidence in the banking sector, andprovides a crucial anchor for sound risk management practices“.For a recent contribution to the debate from the UK perspective seeWalker Review (2009), which emphasizes five key themes: (i) the validityof the “comply or explain” approach, according to which adherence toCorporate Governance Codes should be voluntary, but departure fromstandards should be explained; (ii) the time commitment of Non-Executive Directors (NEDs) should be increased; (iii) the Board needs to bemore engaged in risk policies and the profile of the Chief Risk Officer(CRO) needs to be enhanced; (iv) Fund managers and other majorshareholders should be more involved in investee companies and (v) theBoard oversight of remuneration policies should be reinforced.The present global financial crisis illustrates that, when manager’sdecisions are guided exclusively by short term shareholders’ wealthmaximization, instead of being accountable to multi-stakeholders, costsoutweigh benefits. In this context, there seems to be a consensus aroundthe idea that regulation and supervision of banks should be basicallyaimed at safeguarding depositors’ interests and preventing disturbancesin the financial system arising from bank failures. Despite the specificitiesof different types of financial institutions, their Corporate Governanceschemes require, as a rule, a broader focus on all stakeholders.98