Corporate Governance and Access to Finance - ESBG

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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
Figure A.1. Structure of agents' relationships in the creditinstitutions activities with stakeholdersDepositorsBorrowersFinancial servicescontractsDepositinsurance,other facilitiesSupervision andregulatory agencyMotivation andincentivemanagementcontractsCredit institutionsmanagersRisky investmentdecisionsStakeholders- Founders- Public Administration- Depositors- Local communitiesShareholders- OwnersFigure A. 1 shows a simplified scheme of the relationships between themain players in the banking institution activities. Any of the arrows reflectrelationships between them as managers, depositors, borrowers, owners,regulatory bodies and other stakeholders, which should be based ontrust, which can be reinforced through a set of Corporate Governancepractices. The financial services contracts should be provided with security,avoiding fraud, ambiguity and litigation. A system with coverage by depositinsurance schemes and the control and supervision by credible regulatorybodies help achieving this security. Efficient managers running creditinstitutions would reduce transaction costs, allowing for the compatibilitybetween the viability of the institution, appropriate remuneration ofsavings and affordable costs of the loans, and facilitating proximity tothe customers.99
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BoxesBox 1. German Sparkassen 27Box
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EXECUTIVE SUMMARYBackground and obj
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nnAccess to Finance in enshrined in
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Chart A.Corporate Governance, Acces
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nThe study also shows that Corporat
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1. INTRODUCTION1.1. Focus and objec
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WSBI members are by definition acco
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For the particular case of developi
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2. THE LINK BETWEENCORPORATE GOVERN
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Table 2. Main features of the Missi
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Access to financeSparkassen promote
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All these examples illustrate how p
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In the case of Peru, the profits th
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Among the WSBI institutions that re
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BOX 2. KENYA POST OFFICE SAVINGS BA
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The fact that the banking system is
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3. CORPORATE GOVERNANCE -CONCEPTUAL
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Figure 2. Sound Governance of Finan
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As can be seen in the figure above,
Page 47 and 48: nnnAt the same time, the distance a
Page 49 and 50: The first two elements (the ownersh
Page 51 and 52: nHowever, this does not mean denyin
Page 53 and 54: Cooperatives are similar to mutuals
Page 55 and 56: 3.4. FoundationsFoundations do not
Page 57 and 58: 3.5. Good Corporate Governance prac
Page 59 and 60: F. DISCLOSURE AND TRANSPARENCYPrinc
Page 61 and 62: 4. ACCESS TO FINANCE -CONCEPTUAL FR
Page 63 and 64: 4.1. Financial deepening and improv
Page 65 and 66: The board does not have any executi
Page 67 and 68: In other words, sustainable financi
Page 69 and 70: The following table shows how the W
Page 71 and 72: The fourth dimension refers to the
Page 73: Table 8. Access to Finance in the f
Page 76 and 77: Only 27 members established in 21 c
Page 78 and 79: nnDCI (Depth of credit information
Page 80 and 81: 5.2. Corporate Governance and Acces
Page 82 and 83: 5.2.1. Corporate Governance and Ave
Page 84 and 85: Chart 8.Specific Corporate Governan
Page 86 and 87: 5.2.2. Corporate Governance and Ave
Page 88 and 89: Chart 13. Corporate Governance comp
Page 90 and 91: Chart 16. Corporate Governance Inde
Page 92 and 93: Chart 19. Specific Corporate Govern
Page 95 and 96: ANNEX 1: REVIEW OFTHE LITERATUREThe
Page 97: Even among the relatively narrow un
Page 101 and 102: The table captures the essence of s
Page 103 and 104: A case study built by Clarke et al
Page 105 and 106: A very recent contribution to the d
Page 107 and 108: For example, in Latin America, WSBI
Page 109 and 110: The paper examines whether a poor e
Page 111 and 112: For the survival of microfinance in
Page 113 and 114: ANNEX 2: CASE STUDIES 32CASE STUDY
Page 115 and 116: It is one of the major characterist
Page 117 and 118: Although Sparkassen are legally and
Page 119 and 120: Figure A.2. Corporate Loans Market
Page 121 and 122: Financial education is also an impo
Page 123 and 124: Corporate GovernanceKPOSB is wholly
Page 125 and 126: Among the initiatives that the gove
Page 127 and 128: Related to the concession of credit
Page 129 and 130: OPERATIONS1. Deposit Base: It was p
Page 131 and 132: Corporate GovernanceThe Central Ban
Page 133 and 134: To address the problem of capital,
Page 135 and 136: Financial inclusion ranges very hig
Page 137 and 138: CASE STUDY 4:SPANISH SAVINGS BANKS
Page 139 and 140: The uniform financial regulation of
Page 141 and 142: Figure A.3. Governing Bodies - Span
Page 143 and 144: The web-based tool www.rededucacion
Page 145 and 146: On the liability side, CMAC offer m
Page 147 and 148: A specificity of CMAC is that the m
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Table A.3.MissionMissionCMAC AREQUI
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As of September of 2009, the twelve
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Furthermore, the consensus culture
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ANNEX 3: QUESTIONNAIREQUESTIONI. Ge
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ANNEX 4:THE HONOHAN INDEX 43COMPOSI
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COMPOSITE MEASURE OF ACCESS TO FINA
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ANNEX 5:QUANTITATIVE RESULTSCountry
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Overall Corporate Governance IndexO
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REFERENCES- Andrianova, S., Demetri
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- FSD Kenya (2009), Financial Secto
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- World Bank (2006) The Role of Pos
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WSBI - ESBG - The Global Voice of S
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